RRSP over-contribution: what does going over cost?
Enter the deduction limit from your latest notice of assessment, your total undeducted contributions and how many months before you fix it: the calculator works out the monthly tax.
1% tax a month
$90
$1,500 above the $2,000 cushion: $15 a month.
| Amount over the limit | $3,500 |
| Cushion (age 18 and over) | $2,000 |
| Part taxed at 1% a month | $1,500 |
File Form T1-OVP within 90 days after the end of the year of the excess.
Prepared by Radif Partners · How we calculate · limits and tax tables read on canada.ca · estimates only, not a notice of assessment
An RRSP over-contribution is only taxed beyond a $2,000 cushion: the tax is 1% a month on the part of your undeducted contributions that exceeds your deduction limit by more than $2,000. With a $10,000 limit and $13,500 contributed but not deducted, you are $3,500 over, $1,500 of that is taxed, and the tax is $15 a month for as long as the excess stays in the plan. The cushion only applies if you were at least 18 at some point in the previous year. The tax is reported on Form T1-OVP, which must be filed and paid no later than 90 days after the end of the year of the excess. The way to stop it is to withdraw the surplus: the withdrawal is added to income, but an offsetting deduction is often available. Common causes are a pension adjustment that cuts your limit, room counted wrong, or contributions made by an employer.
How the excess is worked out
The Canada Revenue Agency compares two amounts, according to its page on excess contributions: on one side, your undeducted contributions from past years plus this calendar year's; on the other, the deduction limit on your latest notice of assessment, notice of reassessment or Form T1028, plus $2,000. Whatever is above is taxed at 1% a month. Contributions to your spouse's RRSP count in your own calculation.
The $2,000 cushion is only for people who were 18 or older at some point in the previous year. For a minor who contributed, every dollar over the limit is taxed.
| Amount over the limit | Part taxed | Tax a month | Over 12 months |
|---|---|---|---|
| $1,500 | $0 | $0 | $0 |
| $2,000 | $0 | $0 | $0 |
| $3,000 | $1,000 | $10 | $120 |
| $5,000 | $3,000 | $30 | $360 |
| $10,000 | $8,000 | $80 | $960 |
| $20,000 | $18,000 | $180 | $2,160 |
The tax is monthly. An excess created in March and withdrawn in October is taxed for each month it stayed, and a contribution withdrawn before the end of the month in which it created the excess is not taxed for that month. Every month counts: fixing it quickly costs less than waiting for tax season.
Form T1-OVP
If you owe the tax, you report it on the T1-OVP, or its simplified version T1-OVP-S, sent with your payment no later than 90 days after the end of the year of the excess. Include documents showing the exact month of each contribution and withdrawal: receipts and T4RSP slips do not show them. Without those months, the CRA places contributions from the first 60 days in January, the rest of the year's in March, and withdrawals in December, which often adds taxed months.
If you are late, the penalty is 1% of the balance owing per month, up to 12 months, and interest runs from the 91st day of the following year. If the excess came from a reasonable error, Form RC2503 lets you ask for the tax to be cancelled, provided you show the steps taken to remove it.
Withdrawing the surplus
Taking out the excess stops the tax for the months that follow. The withdrawal is taxable income, but you can deduct the same amount if you withdraw it in the year of the contribution, the following year, or the year you receive the notice of assessment for the contribution year or the year after, and if you reasonably expected to deduct the money or did not put it in intending to take it out. Form T746 works out that deduction.
Without any other step, the institution applies the usual withholding: on $3,500, that is 10%, or $350, under the CRA withholding rates (Quebec has its own rates). You then claim it on your return as tax already withheld. Form T3012A, approved by the CRA before the withdrawal, lets the money come out with no withholding. The RRSP withdrawal page covers tax on other withdrawals.
Redo your deduction limit
2026 RRSP deduction limit
$14,400
| 18% of 2025 earned income | $14,400 |
| 2026 dollar limit | $33,810 |
| Minus pension adjustment | $0 |
| New room this year | $14,400 |
Pension adjustments and employer contributions
Two situations create an excess without people noticing. The first is the pension adjustment from an employer pension plan, which lowers the next year's limit. With a $60,000 salary, room drops from $10,800 to $6,800 with a $4,000 adjustment. Someone who puts in $13,800 relying on the first number is $7,000 over and pays $50 a month. A past service pension adjustment certified after the notice of assessment can also cut the limit during the year: the CRA then sends Form T1028 with the revised figure. The RRSP limit page explains these adjustments.
The second is money paid in at work. Contributions to a pooled registered pension plan, including the employer's, count when the excess is worked out. Qualifying group plan amounts can escape the 1% tax. When contributions to a group RRSP or such a plan are mandatory, you file the full T1-OVP with a copy of the contract or collective agreement that makes them mandatory.