How do RRSP contributions benefit self-employed Canadians?
A Registered Retirement Savings Plan (RRSP) is one of the most powerful tax-reduction tools available to self-employed Canadians. Unlike employees who benefit from workplace pensions, self-employed individuals are solely responsible for their retirement savings — making RRSP contributions especially important. **Tax benefit:** RRSP contributions are deducted from your income, reducing your taxable income dollar-for-dollar. If you contribute C$10,000 to your RRSP and you're in a 40% combined marginal tax bracket, you save C$4,000 in tax immediately. **2024 RRSP contribution limit:** 18% of your 2023 earned income, up to a maximum of C$31,560. For 2025, the maximum is C$32,490. Unused contribution room carries forward indefinitely. **Self-employment earned income:** For RRSP purposes, your earned income includes your net self-employment income (from T2125). CPP contributions and business expenses reduce your net income and therefore your RRSP room. **Deadline:** RRSP contributions for the 2024 tax year must be made by **1 March 2025** (60 days after year-end). This is a strict deadline — contributions made after this date count toward the following year.
- RRSP contributions reduce taxable income dollar-for-dollar
- 2024 limit: 18% of 2023 earned income, max C$31,560
- Unused contribution room carries forward indefinitely
- Contribution deadline: 60 days after December 31 (1 March 2025 for 2024)
- Net self-employment income (after expenses) is your 'earned income' for RRSP