What is an "RRSP deduction limit" for?

Question

I'm not asking what my limit is—I can see what is the dollar amount of my deduction limit.

Rather, I don't quite grasp what is an RRSP deduction limit for? Why is there a limit? A limit to what? What's being deducted?

Could someone please give me the For-Dummies explanation of the RRSP deduction limit?

ShemSeger · Accepted Answer · 2015-04-27 18:55:00Z

2

It is the maximum amount of tax-free savings you can contribute towards your RRSP in a given year. Any excess contributions are not tax deductible.

ShemSeger

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answered Apr 1, 2015 at 19:19

Victor123

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So it's a cap on how much tax free money you can put away in a year?
– ShemSeger
Apr 1, 2015 at 19:28
Yes, that is right. It is 18% of your gross income or 20,000, whichever is lower (I think)
– Victor123
Apr 1, 2015 at 19:41
Hmm, well I don't think it's either of those, because my deduction limit this year is equal 100% of my gross.
– ShemSeger
Apr 1, 2015 at 19:50
1

Yes, you carry forward unused deduction limits from prior years.
– ChrisInEdmonton
Apr 1, 2015 at 21:00
1

FYI to all, that "20,000" mentioned is approximate and actually increases each year. For 2014 it was $24,270 and for 2015 it is $24,930. Hope this helps!
– fideli
Apr 27, 2015 at 16:48

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