Everything about your RRSP, TFSA and FHSA contribution limits

What are contribution limits?

Registered savings plans available in Canada, such as the RRSP, the TFSA and the FHSA, offer many tax advantages that can help your savings grow.

To prevent excess contributions, the government sets annual contribution limits that may vary according to your income or contributions made in previous years. This is commonly referred to as the contribution “limit” or “room”.

You can check your contribution limits for each plan at any time on your Canada Revenue Agency (CRA) account or on your RRSP or FHSA contribution notice.

Let’s take a look at the rules that apply to each of the three plans.

Contribution limit for the Registered Retirement Savings Plan (RRSP)

The contribution limit for your RRSP depends primarily on the income you earned in the previous year. As a general rule, you can contribute:

• up to 18% of your earned income for the previous taxation year or
• up to the maximum annual amount established by the CRA (which varies each year)

If you participate in your employer’s pension plan, your RRSP limit will be reduced by a pension adjustment. Make sure you know your exact contribution limit by checking your CRA account.

It’s important not to go over your contribution limit. The CRA allows you to have an excess of $2,000 in your RRSP without penalty. However, contributions in excess of this amount will cost you 1% per month until the situation is corrected.

Example: Your contribution limit is $30,000 and you have invested $33,000. You won’t be charged a penalty on the first $2,000, but the remaining $1,000 will be taxed at $10 per month.

Remember that any withdrawal from your RRSP is taxable, and the amount withdrawn during the year is not added to your contribution room at the beginning of the following year.

Contribution limit for the Tax-Free Savings Account (TFSA)

In the case of the TFSA, the government sets a maximum contribution amount each year. This limit is the same for everyone and is not linked to your income. From the age of 18, you are entitled to additional contribution room each year, on top of the room you have from previous years.

Here is the list of TFSA limits since the plan was created in 2009:

A person who has been eligible for a TFSA since its inception in 2009 would therefore have a contribution limit of $102,000 in 2025.

A tax of 1% per month is applied to the amount of your contribution that exceeds your limit, and there is no surplus allowed: every dollar in excess of your limit is taxed. It’s a good idea to always keep an eye on your contribution room by checking your CRA account.

Contribution limit for the First Home Savings Account (FHSA)

As its name suggests, the FHSA is designed to help first-time home buyers build up a down payment. If you are not already a homeowner and you meet the eligibility criteria, you can contribute up to $8,000 per year to your FHSA up to a lifetime maximum of $40,000.

The penalty for excess contributions is a tax of 1% per month on the amount that exceeds your limit. There is no surplus allowed.