How it works: RRSPs & the first-60-days.
February 18, 2021
Registered Retirement Savings Plans (RRSPs) are a pretty great way to save money for retirement and reduce your taxes, so it’s no surprise that millions of Canadians have one. As much as we love RRSPs, we know managing them can be a bit confusing. If you have one, you’ve probably heard of the first-60-days rule. Here’s what you need to know about it.
Unlike most deductions that you’d make throughout a tax year, RRSPs are one of the few that aren’t tied to the calendar year. Medical expenses, transit passes, employment expenses are all limited to January 1 to December 31 of the tax year you’re filing for. When it comes to RRSPs, you can still claim a contribution and a deduction after December 31.
How it works
- Let’s say you contributed to your RRSP in 2020, you’ll need to record it on your 2020 return
- If you contributed within the first 60 days of 2021, you’ll also need to record it on the 2020 return
- When you do contribute to your RRSP after December 31, 2020, you’ll receive RRSP receipts for any contributions made in the first 60 days of 2021, whether you started making regular monthly contributions or a one-time deposit.
Recording contributions vs. claiming them
If you contributed during between March and December of 2020 or in the first 60 days of 2021, you need to indicate it on your 2020 return when you file it. But you don’t necessarily need to deduct your contribution from your overall taxable income in 2020. You might want to claim these deductions next year instead, if you’d already be getting a refund or know that you might earn more income in the future.
Old RRSP receipts: what to do with them
If you find an old contribution receipt from a few years ago, you can’t just add it to this year’s return. You’d need to file an adjustment to your previous return so you can claim the receipt in the right year.
By the time January and February roll around, you’ll have a sense of what your total income will be for the previous year. The first-60-days rule is a good way to see if you should contribute more to your RRSP to lower your taxes owed, or save some deduction room for next year.
Think you might need to file an adjustment? Wondering about your contribution room this year? If you’ve got a question about your RRSP, we can help.
With nearly 60 years of experience preparing and filing all sorts of Canadian taxes, H&R Block has tax solutions that will fit your needs and gives you access to the largest network of reliable Tax Experts. Choose from one of four convenient ways to file: File in an Office, Drop-off at an Office, Remote Tax Expert, or Do It Yourself Tax Software.