Guides › RRSP Over-Contribution: $2,000 Buffer and 1% Monthly Tax

RRSP Over-Contribution: $2,000 Buffer and 1% Monthly Tax

Short answer: Per CRA, you generally pay 1% per month on unused RRSP, PRPP and SPP contributions that exceed your deduction limit by more than $2,000. The $2,000 extra applies only if you were 18 or older at any time in the previous year. Figures below come from CRA's 2025 page.

How CRA describes it

• You have an excess if your unused contributions plus current-year contributions exceed your RRSP deduction limit (from your latest notice of assessment, reassessment or T1028) plus $2,000.
• The $2,000 is not deductible; it is only a tax-free cushion.
• Your notice of assessment may flag a possible 1% tax.

Possible relief

You may not owe the 1% tax on all of an excess if you withdrew the excess before the end of the month it arose, or the contributions were qualifying group plan amounts. HBP or LLP withdrawals may not erase the tax.

Filing and paying

• If tax applies, file T1-OVP and pay no later than 90 days after the end of the year (CRA's dates page says March 31).
• Late T1-OVP penalty: 5% of balance owing plus 1% per month up to 12 months (may be higher with prior penalties).
• Interest compounds daily on unpaid tax and penalties, starting on the 91st day of the following year.
• CRA may waive or cancel the tax if the excess arose from a reasonable error and you are taking reasonable steps to fix it (Form RC2503).
• Send documents that show the exact months of contributions and withdrawals; RRSP receipts and T4RSP/T4RIF slips don't show months.

Made-up example

Limit $10,000; you contribute $13,500. Excess over limit $3,500; over the $2,000 cushion $1,500. Roughly 1% a month of the amount over the cushion is the CRA's described tax basis (about $15 a month on $1,500). Confirm the exact computation with CRA.

FAQ

Does the cushion apply for 2026? CRA's 2025 text refers to being 18 in 2024; assume the same pattern, but check the 2026 version.

What if I am unsure? Talk to CRA or a tax professional.

What we could not verify

• 2026-year wording and forms (T1-OVP for 2026).
• Exact computation in complex cases.

Sources (official)

• CRA, Excess Contributions — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/contributing-a-rrsp-prpp/what-happens-you-over-your-rrsp-prpp-deduction-limit.html (read October 17, 2026; figures shown are for 2025)
• CRA, How contributions affect your RRSP deduction limit — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/contributing-a-rrsp-prpp/contributions-affect-your-rrsp-prpp-deduction-limit.html (read October 17, 2026; figures shown are for 2025)
• CRA, Due dates and payment dates (personal income tax) — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/important-dates-individuals.html (read October 17, 2026; shows 2025-tax-year dates)

RRSP deadline planner → Dates calendar →

Not tax or financial advice. See the disclosure.