RRSP Excess Contributions
An RRSP is a retirement savings plan that you establish, that the CRA registers, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax.
Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan. You generally have to pay tax when you receive payments from the plan.
If you (or your employer for pooled registered pension plan (PRPP) purposes) contribute more to your RRSP, PRPP or SPP, or your spouse's or common-law partner's RRSP or SPP than your RRSP deduction limit allows, you will have an excess contribution.
Generally, you have RRSP excess contributions if your unused RRSP, PRPP, and SPP contributions from prior years and your current calendar year contributions are more than your RRSP deduction limit shown on your latest notice of assessment, notice of reassessment, or Form T1028, Your RRSP Information for 2024, plus $2,000.
Also, you can only qualify for the additional $2,000 amount if you were 18 or older at any time in 2023.
Generally, you have to pay a tax of 1% per month on your unused contributions that exceed your RRSP deduction limit by more than $2,000. Your notice of assessment or notice of reassessment will indicate that you may have to pay a 1% tax on RRSP excess contributions if your unused RRSP, PRPP, or SPP contributions exceed your RRSP deduction limit. You can view your RRSP information online by going to My Account for Individuals.
FHSA Excess amount
A first home savings account (FHSA) is a registered plan which allows you, if you are a first-time home buyer, to save to buy or build a qualifying first home tax-free (up to certain limits).
Generally, your FHSA participation room for the year is the maximum amount that you may contribute or transfer to your FHSAs in the year without creating an excess FHSA amount. Your FHSA participation room in the year you open your first FHSA is $8,000.
You can find the details about your FHSA participation room for the following year on your:
- •Latest notice of assessment
- •Latest notice of reassessment
- •Form T1028, Your RRSP, HBP, LLP or FHSA information for 2025
You may have an excess FHSA amount if the total of your contributions to your FHSAs and transfers from your registered retirement savings plans (RRSPs) to your FHSAs in a year are more than your FHSA participation room for that year.
Tax on excess FHSA amounts
Generally, you have to pay a tax of 1% per month on the highest excess FHSA amount in that month. You will continue to pay the monthly 1% tax until the excess FHSA amount is eliminated. Your excess FHSA amount will be reduced or eliminated by your new FHSA participation room (on January 1 of the following year), or by removing amounts from your FHSAs.
TFSA Excess Contributions
The Tax-free Savings Account (TFSA) is a registered savings account that functions like an investment account. It can hold cash savings and investments that generate tax-free income.
TFSAs are overseen by the Government of Canada but administered by Canadian banks and financial institutions.
Any contribution you make to your TFSA and any income you earn through interest, dividends or capital gains are generally tax-free, even when you make a withdrawal. However, unlike an RRSP, contributions you make to a TFSA are not tax deductible.
If you over-contribute to your Tax-free Savings Account (TFSA) and the excess amount is still in your account, withdraw it as soon as possible. Do not wait for the CRA to inform you, as any excess amount in your TFSA is taxable at 1% per month for as long as it remains in your account. If the over-contribution is deliberate, there may be additional tax consequences.
The CRA may notify you if you have over-contributed to your TFSA and advise you of the potential tax implications. CRA send this notification to some TFSA holders through their CRA account or by mail in late spring, after they are informed of the excess by the TFSA issuer.
Whether you receive a notification or not, you will be required to file a TFSA Return for the excess amount. If you do not file a TFSA Return, you may receive a TFSA notice of assessment (NOA) later in the summer.
Check your limits before contributing to RRSP, FHSA or TFSA to avoid penalties. For assistance in completing the over contribution returns, contact us at 905-605-4775.