Each year after your personal tax filings, you should receive a Notice of Assessment (NOA) from the CRA.
Most of the times determining your RRSP deduction limit is fairly straight forward. However during tax season we consistantly get these three questions below. The confusion often stems from when a person has company pension plans and/or participates in company's RRSP plans. Click HERE to find out how to interpret your NOA and answers to below questions.
- How much can you contribute to your RRSP ?
- How much RRSP can you deduct on your tax return ?
- Risk of over-contributions?
We would like to also highlight a few things:
- Your RRSP deduction limit is calculated in part by determining your earned income. Earned income includes net income from employment, business and rental income, as well as other income, such as alimony received, but it does not include investment income.
- If you have work pension plans, your RRSP contribution limit for the following year (i.e. 2020) will be reduced.
- If you are participating in your work's RRSP plan, it will reduce this year's (2019) amount that you contribute.
- When there is a risk of over-contribution, it gets a little “messy”. Please take a close read of this ARTICLE. If you’re in an over-contribution position in excess of $2,000 in any year, you are required to file a T1-OVP, Individual Tax Return for RRSP Excess Contributions. This return is used to calculate the penalty you owe. You are required to pay the penalty and submit the completed return no later than 90 days after the end of the year.