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RRSP contributions
To begin, let’s look at who can contribute to an RRSP. If you are under the age of 69 and have earned income in the previous year, then you are eligible for an RRSP. Earned income includes income from employment, and can also include supplementary unemployment benefits, alimony and maintenance payments, royalties, research grants, net business income, net rental income, and a few other miscellaneous types of income.
Your maximum contribution limit is 18% of your previous year’s earned income up to the maximum level for that year, less your pension adjustment (PA) and/or your past service Pension Adjustment (PSPA)*. The pension adjustment (PA) can be found on your T4 Supplementary form.
Under current legislation, you have up to $2,000 of room to make over contributions to your RRSP. If you were to over-contribute the $2,000 today, you would not be able to take it as a tax deduction but the $2,000 would be invested on a tax-deferred basis within your RRSP until the time you decide to use it as a contribution. This tactic can make a significant difference to your retirement savings.