Need help in understanding RRSP contribution limit calculation
I need some help figuring out my RRSP contribution limit for my 2016 tax return because I just filed my 2015 and haven't received the NOA. I want to ensure I max out my RRSP contribution for my 2016 return.
Is the following correct?
I have a NOA for 2014 tax year for RRSP contribution limit of A
I filed 2015 recently (yeah..now I know why NOT to file late!). I assume I will add 0.18 of the total (or net?) income for 2015 - assume this is amount B
and can I also add the 0.18 of total income for 2016 - assume this is amount C
is using TOTAL income okay (assuming it meets the type of income listed for RRSP contribution calculation) or is it supposed to be NET income?
AND Assuming all amounts are equal or lower than the max contribution limit for the year (I don't have any employer contribution plans)
So in calculating my 2016 RRSP contribution limit - it would be A + B + C from above?
I have no unused contributions at this time.
Or does it lag by a year? (i.e. I don't inlude the 0.18 of 2016 income for purchasing RRSPs that count towards that year.)
Your help greatly appreciated! Need to figure this out before end of Feb so I can top up my RRSP purchase.
If this is posted in the wrong topic, please let me know.
You say you have no unused contributions.
So based on your 2014 NOA you must have contributed "A" as your 2015 RRSP contribution?
Now, your 2015 NOA when you get it should then show "A" as your 2016 RRSP limit and it should be 18% of your 2015 earned income (to a max of $25,370) with no past contribution room 'carried forward'. CRA defines earned income as: we calculate your earned income by adding your employment earnings, self-employment earnings, and certain other types of income, then subtracting specific employment expenses and business or rental losses. To calculate your earned income, see Step 2 of Chart 3.
Added: I see you have posted this thread twice. Nerd Investor answered your other thread and raised a good point - if you have pension contributions at work, that amount will reduce the amount you can contribute to your RRSP. You would have see this on your 2014 NOA if your job situation has not changed.
Last edited by OnlyMyOpinion; 2017-02-09 at 10:13 AM.
In the Taxation section, I've posted a good Tax Tips summary as well as Chart 3 from CRA's web site that walks through the eight steps for calculating the 2016 deduction limit (contribution room plus contributions that have not yet been deducted) using 2015 earned income.
Originally Posted by OnlyMyOpinion
It is a good point ... though I don't recall anywhere on the NOA (be it the tax return or the RRSP deduction limit sections) that mentions the pension adjustment (PA). I suspect the most effective place to check is the 2014 T4, box 52 as it is supposed to contain the PA.
Originally Posted by OnlyMyOpinion
Unless the benefits have changed (ex. employer converted pension types or dropped the pension) or employment income has changed dramatically - I would think the 2014 number would be a reasonable estimate. The tough PA to figure out is where the pension is a defined benefit pension. The rest are simply a matter of knowing the total contributions (i.e. employer & employee).
You are new to the forum.
Hopefully you have already discovered that posting the same question in two different threads (retirement and taxation) as you have done is NOT a good idea. It would be much easier to track all replies in one thread. Yes?
Wait until you have your NOA's for 2015 & 2016. Then you will know what you can contribute in 2017. Forget about 2016 contributions - its just guesswork at this stage. If you can't file your taxes on time I would have no confidence in your ability to properly predict/calculate what your 2016 limit is. The forum is full of posts by people who overcontributed by trying to predict their contribution room. Chalk it up to experience.
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