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IRRSP Practice Test (NEW UPDATED VERSION) LATEST ACTUAL EXAM
QUESTIONS AND CORRECT ANSWERS (VERIFIED QUESTIONS AND ANSWERS)-
GUARANTEED PASS A+ UPDATED 2026
Q1: What does IRRSP stand for?
A: Individual Registered Retirement Savings Plan
Rationale: An IRRSP is a registered retirement savings account that allows Canadians to save
for retirement while receiving tax benefits.
Q2: How are contributions to an IRRSP treated for tax purposes?
A: They are tax-deductible, reducing taxable income.
Rationale: Contributions reduce your taxable income in the year they are made, lowering
income tax payable.
Q3: What is the annual contribution limit to an IRRSP based on?
A: A percentage of earned income and any unused contribution room from previous years.
Rationale: The government sets a limit (typically 18% of earned income up to a maximum) plus
any carry-forward room.
Q4: Are investment earnings inside an IRRSP taxed annually?
A: No, investment growth is tax-deferred.
Rationale: Taxes are only paid when funds are withdrawn from the plan.
Q5: At what age must IRRSP contributions stop?
A: By the end of the year you turn 71.
Rationale: After 71, the IRRSP must be converted to a RRIF or annuity.
Q6: What happens if you withdraw funds from an IRRSP before retirement?
A: Withdrawals are subject to tax withholding and included as income.
Rationale: Early withdrawals reduce the retirement savings benefit and are taxed as income.
practice exam 2026
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Q7: What is the purpose of the Home Buyers’ Plan (HBP) in relation to IRRSPs?
A: Allows first-time homebuyers to withdraw up to $35,000 from an IRRSP tax-free to buy a
home.
Rationale: HBP withdrawals must be repaid to the IRRSP over 15 years to avoid taxes.
Q8: What is the Lifelong Learning Plan (LLP)?
A: A program allowing tax-free withdrawals from an IRRSP to finance education.
Rationale: Withdrawals must be repaid over 10 years; it supports further education without
immediate tax.
Q9: Are contributions to a spouse’s IRRSP allowed?
A: Yes, they are called spousal contributions.
Rationale: Contributions to a spouse’s IRRSP can generate tax deductions for the contributor
and income splitting for retirement.
Q10: What is the tax treatment of withdrawals from a spousal IRRSP?
A: Taxed in the hands of the plan owner if made within 3 years of contribution; otherwise taxed
to the spouse.
Rationale: Prevents immediate income splitting abuse.
Q11: Can IRRSP funds be invested in mutual funds, stocks, bonds, and ETFs?
A: Yes
Rationale: IRRSPs are flexible investment accounts, and growth is tax-deferred.
Q12: What is “contribution room” in an IRRSP?
A: The maximum amount you can contribute to an IRRSP without penalty.
Rationale: Contribution room accumulates from the current year and any unused room from
prior years.
Q13: What is the maximum contribution for 2026? (assume CRA limit is $31,560)
A: 18% of earned income up to $31,560 plus any unused contribution room.
Rationale: CRA sets annual maximums; contributions beyond this incur penalties.
practice exam 2026
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Q14: What penalty applies for over-contributing to an IRRSP?
A: 1% per month on excess contributions over $2,000.
Rationale: CRA imposes penalties to discourage over-contribution.
Q15: How are IRRSP withdrawals taxed in retirement?
A: Fully taxed as income in the year of withdrawal.
Rationale: Taxes are deferred until retirement, when income may be lower.
Q16: Can you carry forward unused contribution room?
A: Yes, indefinitely.
Rationale: Unused room from previous years increases future contribution capacity.
Q17: When converting an IRRSP to a RRIF, what is the minimum withdrawal requirement?
A: A percentage of the RRIF balance based on age.
Rationale: CRA mandates minimum withdrawals to ensure eventual taxation.
Q18: Are IRRSP contributions deductible if you participate in a pension plan?
A: Only up to your available contribution room, reduced by the Pension Adjustment (PA).
Rationale: PA accounts for benefits accrued in employer pension plans, limiting deduction
room.
Q19: Can non-residents contribute to an IRRSP?
A: Generally no, unless they have Canadian earned income and contribution room.
Rationale: Only residents with earned income in Canada are eligible.
Q20: What is the advantage of contributing early in the year?
A: More time for tax-deferred growth.
Rationale: Earlier contributions allow investment earnings to compound for a longer period
before taxation.
practice exam 2026
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Q21: Can contributions be made to a spousal IRRSP?
A: Yes
Rationale: Contributions to a spouse’s IRRSP allow income splitting in retirement and tax
deductions for the contributor.
Q22: How are withdrawals from a spousal IRRSP taxed if made within 3 years of contribution?
A: Taxed to the contributor
Rationale: This rule prevents immediate income-splitting abuse; after 3 years, withdrawals are
taxed to the spouse.
Q23: What investment types are allowed inside an IRRSP?
A: Mutual funds, stocks, bonds, ETFs, GICs
Rationale: IRRSPs provide flexible investment options, with all growth tax-deferred.
Q24: What is contribution room?
A: The maximum amount that can be contributed to an IRRSP without penalty
Rationale: Includes current year limit plus unused room from prior years.
Q25: What happens if you exceed your IRRSP contribution limit?
A: 1% per month penalty on excess contributions above $2,000
Rationale: CRA imposes penalties to discourage over-contribution.
Q26: What is the maximum annual IRRSP contribution for 2026?
A: 18% of earned income up to $31,560 plus any unused room
Rationale: CRA sets annual maximums, which are indexed to inflation.
Q27: Are IRRSP contributions deductible if you are in a pension plan?
A: Only up to available contribution room, reduced by the Pension Adjustment (PA)
Rationale: PA accounts for pension benefits accrued in employer plans, limiting contribution
room.
practice exam 2026
IRRSP Practice Test (NEW UPDATED VERSION) LATEST ACTUAL EXAM
QUESTIONS AND CORRECT ANSWERS (VERIFIED QUESTIONS AND ANSWERS)-
GUARANTEED PASS A+ UPDATED 2026
Q1: What does IRRSP stand for?
A: Individual Registered Retirement Savings Plan
Rationale: An IRRSP is a registered retirement savings account that allows Canadians to save
for retirement while receiving tax benefits.
Q2: How are contributions to an IRRSP treated for tax purposes?
A: They are tax-deductible, reducing taxable income.
Rationale: Contributions reduce your taxable income in the year they are made, lowering
income tax payable.
Q3: What is the annual contribution limit to an IRRSP based on?
A: A percentage of earned income and any unused contribution room from previous years.
Rationale: The government sets a limit (typically 18% of earned income up to a maximum) plus
any carry-forward room.
Q4: Are investment earnings inside an IRRSP taxed annually?
A: No, investment growth is tax-deferred.
Rationale: Taxes are only paid when funds are withdrawn from the plan.
Q5: At what age must IRRSP contributions stop?
A: By the end of the year you turn 71.
Rationale: After 71, the IRRSP must be converted to a RRIF or annuity.
Q6: What happens if you withdraw funds from an IRRSP before retirement?
A: Withdrawals are subject to tax withholding and included as income.
Rationale: Early withdrawals reduce the retirement savings benefit and are taxed as income.
practice exam 2026
,2|Page
Q7: What is the purpose of the Home Buyers’ Plan (HBP) in relation to IRRSPs?
A: Allows first-time homebuyers to withdraw up to $35,000 from an IRRSP tax-free to buy a
home.
Rationale: HBP withdrawals must be repaid to the IRRSP over 15 years to avoid taxes.
Q8: What is the Lifelong Learning Plan (LLP)?
A: A program allowing tax-free withdrawals from an IRRSP to finance education.
Rationale: Withdrawals must be repaid over 10 years; it supports further education without
immediate tax.
Q9: Are contributions to a spouse’s IRRSP allowed?
A: Yes, they are called spousal contributions.
Rationale: Contributions to a spouse’s IRRSP can generate tax deductions for the contributor
and income splitting for retirement.
Q10: What is the tax treatment of withdrawals from a spousal IRRSP?
A: Taxed in the hands of the plan owner if made within 3 years of contribution; otherwise taxed
to the spouse.
Rationale: Prevents immediate income splitting abuse.
Q11: Can IRRSP funds be invested in mutual funds, stocks, bonds, and ETFs?
A: Yes
Rationale: IRRSPs are flexible investment accounts, and growth is tax-deferred.
Q12: What is “contribution room” in an IRRSP?
A: The maximum amount you can contribute to an IRRSP without penalty.
Rationale: Contribution room accumulates from the current year and any unused room from
prior years.
Q13: What is the maximum contribution for 2026? (assume CRA limit is $31,560)
A: 18% of earned income up to $31,560 plus any unused contribution room.
Rationale: CRA sets annual maximums; contributions beyond this incur penalties.
practice exam 2026
,3|Page
Q14: What penalty applies for over-contributing to an IRRSP?
A: 1% per month on excess contributions over $2,000.
Rationale: CRA imposes penalties to discourage over-contribution.
Q15: How are IRRSP withdrawals taxed in retirement?
A: Fully taxed as income in the year of withdrawal.
Rationale: Taxes are deferred until retirement, when income may be lower.
Q16: Can you carry forward unused contribution room?
A: Yes, indefinitely.
Rationale: Unused room from previous years increases future contribution capacity.
Q17: When converting an IRRSP to a RRIF, what is the minimum withdrawal requirement?
A: A percentage of the RRIF balance based on age.
Rationale: CRA mandates minimum withdrawals to ensure eventual taxation.
Q18: Are IRRSP contributions deductible if you participate in a pension plan?
A: Only up to your available contribution room, reduced by the Pension Adjustment (PA).
Rationale: PA accounts for benefits accrued in employer pension plans, limiting deduction
room.
Q19: Can non-residents contribute to an IRRSP?
A: Generally no, unless they have Canadian earned income and contribution room.
Rationale: Only residents with earned income in Canada are eligible.
Q20: What is the advantage of contributing early in the year?
A: More time for tax-deferred growth.
Rationale: Earlier contributions allow investment earnings to compound for a longer period
before taxation.
practice exam 2026
, 4|Page
Q21: Can contributions be made to a spousal IRRSP?
A: Yes
Rationale: Contributions to a spouse’s IRRSP allow income splitting in retirement and tax
deductions for the contributor.
Q22: How are withdrawals from a spousal IRRSP taxed if made within 3 years of contribution?
A: Taxed to the contributor
Rationale: This rule prevents immediate income-splitting abuse; after 3 years, withdrawals are
taxed to the spouse.
Q23: What investment types are allowed inside an IRRSP?
A: Mutual funds, stocks, bonds, ETFs, GICs
Rationale: IRRSPs provide flexible investment options, with all growth tax-deferred.
Q24: What is contribution room?
A: The maximum amount that can be contributed to an IRRSP without penalty
Rationale: Includes current year limit plus unused room from prior years.
Q25: What happens if you exceed your IRRSP contribution limit?
A: 1% per month penalty on excess contributions above $2,000
Rationale: CRA imposes penalties to discourage over-contribution.
Q26: What is the maximum annual IRRSP contribution for 2026?
A: 18% of earned income up to $31,560 plus any unused room
Rationale: CRA sets annual maximums, which are indexed to inflation.
Q27: Are IRRSP contributions deductible if you are in a pension plan?
A: Only up to available contribution room, reduced by the Pension Adjustment (PA)
Rationale: PA accounts for pension benefits accrued in employer plans, limiting contribution
room.
practice exam 2026
