The Registered Retirement Savings Plan (RRSP) was designed to help Canadians save for their retirement from the day they start earning. To encourage retirement savings, RRSPs allow you to deduct contributions from your taxable income. The deadline for 2025 tax year contributions was March 2, 2026. If you missed it, you may still benefit from unused contributions. Let’s break this down.
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How do RRSP deductions work?
When you contribute to the RRSP, you have the option to deduct the amount contributed from your taxable income and reduce your tax liability. This is an option — you can choose to use it now or carry it forward.
- Unused RRSP contribution: If you don’t use your RRSP contribution to reduce your taxable income, it gets carried forward to next year. It is called “unused RRSP contribution”. Even if you are not using the deduction, you still have to report the contribution amount on your tax return.
- RRSP contribution room: The maximum amount you are allowed to contribute, based on 18% of your previous year’s taxable income (up to a CRA‑set limit).
It’s important not to confuse the contribution room with unused contributions. Contribution room is your limit, while unused contributions are actual deposits you’ve made but not yet deducted.
Why would anyone delay an RRSP deduction?
There are multiple reasons for this: one may have surplus cash to invest now, or their income tax liability is not high enough to claim deductions, or they are accumulating unused contributions to claim in the year they earn more.
For instance, William earned $60,000 in 2024 and contributed $5,000 to an RRSP, but did not use that amount to deduct taxable income. In 2025, he earned $125,000 after selling his cottage. He can now use the unused RRSP contribution to reduce taxable income when it has a bigger impact.
Most Canadians avoid investing in RRSPs as the withdrawals are taxable. But note that your RRSP only begins when you start earning and filing returns. Unlike a Tax-Free Savings Account (TFSA), the RRSP contribution limit is 18% of the previous year’s taxable income up to the maximum contribution limit. Taking the previous example, William’s 2024 RRSP contribution limit was $10,800, while his 2025 limit was $22,500. If his 2026 earnings are lower than $125,000, his contribution limit will be reduced.
Suppose you are looking to sell a property or have been building wealth in non-registered investment accounts, you might want to accumulate unused RRSP contributions and claim them in the year you realize a capital gain.
The next move: Invest smartly in your RRSP
RRSPs are powerful tax-planning tools when used strategically. Try investing regularly in this account even if your taxable income is modest. Not only will the unused contribution help you reduce taxable income in the future when you earn more, but it will also help you grow your investments tax-free.
Once the money is deposited in the RRSP, you can invest it in stocks trading on renowned public exchanges, term deposits, and ETFs. You can rebalance your RRSP portfolio tax-free by buying and selling stocks. Ideal stocks are the ones that you can buy and hold for the long term.
TC Energy Stock
TC Energy (TSX:TRP) is a good RRSP candidate due to its regular dividends, dividend growth, and dividend reinvestment plan (DRIP). The gas pipeline company is currently at the cusp of growth as the shift in global energy exports makes Canada a strong candidate for stable and reliable energy sources. Its stock price has surged to an all-time high because of the energy shock from the Iran war, which disrupted the supply chain.
Instead of buying at the peak, consider dollar‑cost averaging — investing $200 monthly. This strategy reduces your average cost over time and builds wealth steadily without straining your budget.
