Updated Checked by the Tax-Services.ca editorial team How we check
You can go over your RRSP deduction limit by $2,000 without penalty. Past that, the CRA charges 1% a month on the excess for as long as it sits in the plan, so $5,000 over costs $50 a month. Pull the extra out (Form T3012A avoids withholding tax) and file Form T1-OVP within 90 days after year end if any tax is owing.
What counts as an RRSP over-contribution?
You have an excess when your unused contributions from earlier years plus this year’s contributions come to more than your RRSP deduction limit plus $2,000. The $2,000 cushion is only for people who are at least 18. Your limit is printed on your notice of assessment, and the one on your 2025 notice is the number to use for 2026.
Employer group plan deposits count toward your limit, and so do contributions to a spousal plan. Our RRSP contribution limit guide explains how the room builds each year.
How much does the penalty cost?
The tax is 1% of the excess above the cushion for each month the excess is in your plan, charged on the whole excess at each month end. You avoid it on any amount you take out before the end of the month it went in.
| Excess above the $2,000 cushion | Tax per month | Tax over 12 months |
|---|---|---|
| $1,000 | $10 | $120 |
| $5,000 | $50 | $600 |
| $10,000 | $100 | $1,200 |
None of those look scary. The trouble is that they keep running every month until the excess is withdrawn or new room absorbs it, and a missed T1-OVP deadline adds its own penalty.
How do I take the extra money out?
Ask your plan issuer for the withdrawal and apply to the CRA for approval on Form T3012A. Once the form is approved, the issuer releases the unused contributions without withholding tax. The CRA’s RRSP guide says you then report the T4RSP amount on line 12900 and deduct the same unused contributions on line 23200, using Form T746.
Approval can take a while, and the monthly tax only stops once the money is out. If you can’t wait, withdraw without the form. The issuer withholds tax, you report and deduct the amount the same way, and you claim the withheld tax on line 43700. The RRSP withdrawal tax calculator gives a sense of the withholding. For the full steps, see the Canada Revenue Agency: RRSPs and other registered plans for retirement guide.
What does it look like from a June contribution to a T1-OVP?
Dana’s 2025 notice of assessment shows a 2026 deduction limit of $12,000. She puts in $14,000 by May, which is her limit plus the $2,000 cushion, so nothing is charged yet. On 12 June she adds $5,000 more. That leaves her $7,000 over her limit and $5,000 over the cushion.
| Date | What happens | Tax |
|---|---|---|
| 12 June 2026 | Extra $5,000 goes in | $0 so far |
| 30 June to 30 September | Excess is in the plan at four month ends | $200 total |
| 20 October 2026 | She spots it, applies for approval, asks for the withdrawal | |
| Before 31 October | $5,000 comes out, so October isn’t charged | $0 |
| By 31 March 2027 | T1-OVP filed and $200 paid | $200 |
The remaining $2,000 can stay in the plan inside the cushion, and she can deduct it once new room appears. When she files in the spring she also reports the $5,000 on line 12900 and deducts it on line 23200.
Can I keep the excess and deduct it later?
Yes. Unused contributions can be deducted in a later year, up to the room you have then, and your notice of assessment shows what’s left. New room each year is the lesser of 18% of your earned income from the previous year and the dollar limit, which is $33,810 for 2026 and $35,390 for 2027. The 1% keeps running on any excess above the cushion until the room catches up.
Year end is a good time to look. Contributions made up to 1 March 2027 can count for the 2026 tax year, so you get a few weeks after 31 December to fix things. Check your latest notice of assessment first, or read about how the RRSP limit is set and run a contribution through the RRSP calculator. The 2027 tax calendar lists the filing dates.
When is Form T1-OVP due, and what if I’m late?
File the T1-OVP and pay the tax within 90 days after the end of the year in which the excess happened. For 2026 that’s 31 March 2027. A late return costs 5% of the balance plus 1% for each month it’s late, up to 12 months, and interest compounds daily starting on the 91st day of the next year.
The CRA can waive or cancel the tax if the excess came from a reasonable error and you’re taking reasonable steps to remove it. You ask on Form RC2503 and back it up with proof of the exact months of your contributions and withdrawals. If you disagree with an RRSP over-contribution assessment, you have 90 days from the notice to object, with no extension to a year after the filing due date. The Canada Revenue Agency: RRSP excess contributions page lists the exceptions, and the Canada Revenue Agency: resolving your dispute guide explains the objection rules.
Where does this information come from?
The cushion, the 1% monthly tax, the T1-OVP deadline and the withdrawal steps come from the CRA’s RRSP excess contributions page and its RRSP guide T4040; the RRSP dollar limits are from the CRA limits table, and the worked dates are an illustration. Checked in October 2026. This is an independent information site: we provide no services, we do not represent the CRA or any organization, and we do not guarantee that anything here is accurate or current. We accept no liability for decisions based on it. Check the official source before you rely on it. See the full disclaimer.
Frequently asked questions
Does the $2,000 cushion reset every year?
No. It's a standing cushion on top of your deduction limit for as long as you're at least 18. Contributions inside it stay in the plan without tax, and you can deduct them once new room appears. Anything above it is taxed at 1% a month.
What if I withdraw the excess in the same month I put it in?
The CRA page says the 1% tax doesn't apply to an excess you take out before the end of the month it was made. A $5,000 contribution put in on 12 June and withdrawn on 28 June wouldn't be charged, because no month end passed.
Who tells me I may owe the tax?
Your notice of assessment or reassessment says if you may owe it. You file the T1-OVP yourself and pay within 90 days after the end of the year in which the excess happened. For the 2026 year that's 31 March 2027.
Does an RRSP contribution made in January 2027 count for 2026?
It can. Contributions made in the first 60 days of 2027, up to 1 March 2027, can be deducted on your 2026 return. Add them to your other contributions when you compare the total against your limit and the $2,000 cushion.
Can the CRA cancel the penalty?
Yes, if the excess came from a reasonable error and you're taking reasonable steps to remove it. Send Form RC2503 with a record of when contributions and withdrawals happened. The CRA says official RRSP receipts and T4RSP slips on their own aren't accepted as that proof.