Most of us pay a monthly fee to the banks for maintaining a chequing or savings account with them. Here are some wa… https://t.co/f6cFr85N1t
All about RRSP/PRPP contributions and deduction limits, Part 1in Tax Advice Information and Updates
One of the first things you have to know when contributing to a Registered Retirement Savings Plan or a Pooled Registered Pension Plan (PRPP) is your deduction limit. Often called “contribution room,” your deduction limit is:
- The amount you can contribute to your RRSP or PRPP;
- The amount that you can contribute to your spouse or common-law partner’s RRSP;
- The amount your employer can contribute to your PRPP;
- The maximum you can deduct on your tax return, reducing your tax for that year.
Where can you find your deduction limit? You can find your RRSP deduction limit or “contribution room” on your Form T1028, Your RRSP/PRPP Information. You can also find this information by going to My Account, CRA’s online service.
How is you RRSP/PRPP deduction determined? The CRA generally calculates your RRSP/PRPP deduction limit as follows:
The lesser of 18% of your earned income in the previous year and the annual RRSP limit (for 2017 the RRSP dollar limit is $26,010) MINUS your pension adjustments and your past service pension adjustments PLUS your pension adjustment reversals and your unused RRSP/PRPP contributions at the end of the previous year.
We’ll continue with our discussion on RRSP/PRPP contributions and deduction limits on our next blog. Stay tuned for more information on who can contribute to an RRSP/PRPP, the deadline to contribute for 2018, among others.