RRSP Overcontribution
The 1% monthly tax on RRSP overcontributions, the $2,000 buffer, and how to fix it.
The short version
- You can be up to $2,000 over your RRSP limit without penalty (if you were 18 or older in the previous year).
- Above that, the excess is taxed at 1% a month until it's withdrawn or new room absorbs it.
- If you owe the tax, file form T1-OVP within 90 days after the end of the year.
- Fix it fast: withdraw the excess (form T3012A can avoid withholding tax) and ask CRA to waive the tax if it was an honest mistake.
- The $2,000 buffer can't be deducted. It just sits there tax-sheltered until you have room for it.
RRSP Overcontribution: Penalties and Fixes
Most RRSP overcontributions aren't greed. They're a group RRSP at work that nobody counted, a monthly auto-deposit that kept going, or a contribution made in February that was already deducted the year before. The penalty is real, but it's also one of the more forgiving ones, if you deal with it quickly.
How the Penalty Works
Your “cumulative excess amount” is what you've contributed but not deducted, minus your deduction limit, minus the $2,000 buffer. If that's more than zero at the end of any month, CRA charges 1% of it for that month.
| Over your limit by | Taxed excess | Tax per month | Tax per year |
|---|---|---|---|
| $1,500 | $0 | $0 | $0 |
| $5,000 | $3,000 | $30 | $360 |
| $15,000 | $13,000 | $130 | $1,560 |
It sounds small. Leave a $15,000 excess for three years and it's over $4,500, and that's before interest and late-filing penalties on the T1-OVP.
How to Fix It
- Confirm the numbers. Check your limit on your notice of assessment and add up every contribution, including group plans and spousal contributions. How the limit works is on RRSP contribution limit explained.
- Withdraw the excess as soon as possible. Form T3012A, approved by CRA, lets the bank pay it out without withholding tax. Without it, the bank withholds as on any withdrawal.
- Deduct the withdrawal on your return (the withdrawal is reported as income, then offset with a deduction for unused contributions refunded, if the conditions are met).
- File form T1-OVP for each year you owe the 1% tax, within 90 days after the end of the year, and pay it.
- Ask CRA to waive the tax by letter if the excess was a reasonable error and you took steps to remove it. CRA reviews each request.
Or, if you'll have new room on January 1 that covers the excess, the tax stops then. Either way, the penalty runs only until the excess is gone.
Got a CRA letter about excess RRSP contributions?
Upload it. The Tax Document Analyzer explains what CRA calculated, which months are affected, and the deadline to respond.
Don't Mix It Up With TFSA Overcontribution
A TFSA has no $2,000 buffer; every dollar over the limit is taxed at 1% a month. The rules and the fix are on TFSA overcontribution.
How It Usually Happens
- A group RRSP or pension-matching plan at work that you forgot about.
- Using last year's limit instead of this year's (or not subtracting your pension adjustment).
- First-60-day contributions counted for both years.
- Contributing after a change in income lowered next year's room.
- Deliberately parking extra money, which CRA treats less kindly when deciding waivers.
Three Rules of Thumb
- Check My Account before every lump-sum contribution.
- Leave the $2,000 buffer for mistakes, not for planning.
- Act in weeks, not years. Waivers are more likely when you fixed it fast.
Return Check compares your RRSP receipts with your deduction limit before you file, which is where most overcontributions first show up. The tax savings side is on RRSP tax deduction explained, and the RRSP tax savings calculator shows what a contribution within your limit is worth.
RRSP Overcontribution Questions
What is the penalty for RRSP overcontribution?
1% per month on the part of your excess contributions that is more than $2,000, for every month the excess remains.
Is there a buffer for RRSP overcontributions?
Yes. You can have up to $2,000 of excess contributions without penalty if you were at least 18 in the previous year, but the excess cannot be deducted until you have room.
How do I fix an RRSP overcontribution?
Withdraw the excess (form T3012A can let you do it without withholding tax), file form T1-OVP within 90 days after the end of each year you owe the tax, and ask CRA in writing to waive the tax if it was a reasonable error.
Can CRA waive the RRSP overcontribution tax?
Yes, if the excess arose from a reasonable error and you take reasonable steps to remove it. You request the waiver in writing.
Sources: CRA, Guide T4040 RRSPs and other registered plans (tax on RRSP excess contributions, form T1-OVP, form T3012A); RRSPs and related plans. Penalty examples calculated by us. Checked October 2026. The withdrawal and deduction mechanics (T3012A, unused contributions refunded) depend on timing; confirm with CRA or a professional before relying on them.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.