Investment · RRSP
RRSP over-contribution penalty.
Contribute more than your deduction limit plus a $2,000 cushion and the CRA charges 1% per month on the excess — for every month it stays in the plan.
This is a different rule from your regular RRSP deduction. Everyone gets a $2,000 lifetime over-contribution cushion above their deduction limit with no penalty. Go past that and the excess is taxed at 1% per month under Part X.1 of the Income Tax Act, starting the month it becomes excess and continuing every month until it is withdrawn or absorbed by new deduction room.
Inputs
Estimated tax
Fill the form and press Calculate.
Why the $2,000 figure isn't "free room"
The $2,000 cushion is a lifetime allowance, not an annual one, and it is not a tax deduction. Contributions inside it are simply not penalized at 1%/month — they still sit in your RRSP as unused contributions until you have enough deduction room to claim them. Many people over-contribute by exactly this amount on purpose, as a small permanent buffer, since it never gets penalized as long as it is never exceeded.
How the tax actually accrues
CRA charges 1% of the highest excess amount in each calendar month the excess remained in the plan, starting the month it became excess. This tool assumes your excess amount stays constant for the number of months you enter — the common case of a lump-sum over-contribution left in place until it's caught. If you make a partial withdrawal partway through, the real month-by-month calculation differs; use the CRA's own T1-OVP form for an actual filing.
Sources, read 25 September 2026: canada.ca "What if you contribute more than your RRSP deduction limit?" (the $2,000 cushion and 1%/month rate), and the T1-OVP form and guide (the month-by-month calculation method and self-reporting requirement).
Frequently asked questions
Do I have to file anything if I over-contribute?
Yes. If you have excess contributions over the $2,000 cushion, you must file a T1-OVP return and pay the tax within 90 days of the year end to avoid an additional late-filing penalty on top of the 1%/month tax itself.
How do I fix an over-contribution?
Withdraw the excess as soon as you find it — the tax stops accruing the month after you withdraw it (or the month new deduction room becomes available and absorbs it, such as at the start of a new calendar year). You can also ask CRA to waive the withdrawal tax normally charged on an RRSP withdrawal, using form T3012A, since you're correcting an error rather than genuinely accessing retirement savings.
Is the $2,000 cushion the same as the annual RRSP dollar limit?
No, they're unrelated numbers. The annual dollar limit (18% of prior-year earned income, capped at a CRA maximum) sets how much NEW deduction room you get each year. The $2,000 cushion is a separate, one-time, lifetime allowance for contributions that exceed whatever your deduction limit already is.
Does the cushion apply per year or once for life?
Once for life. It is not a $2,000-per-year allowance — it is a single $2,000 buffer that applies to your cumulative excess at any point in time.
Estimate only — not a tax filing
This tool calculates from the published CRA 1%/month rate and $2,000 lifetime cushion. It assumes a constant excess balance for the months entered and does not model partial withdrawals, new deduction room arriving mid-year, or the T1-OVP late-filing penalty. Confirm your actual excess and tax owing with the CRA or a tax professional before filing.