# Need help calculating RRSP Contribution limit



## cyndiloo (Feb 9, 2017)

Hi all,

I need some help figuring out my RRSP contribution limit for my 2016 tax 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!) - do I add ).18 of the net income for 2015 - assume this is amount B
and can I also add the 0.18 of net income for 2016 - assume this is amount C

So in calculating my 2016 RRSP contribution limit - it would be A + B + C?

I have no unused contributions at this time.

Or does it lag by a 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.

Thank you!

C.


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## cyndiloo (Feb 9, 2017)

*clarification on "earned income"*

One more question - when they say "earned income" do they mean total income or net income? (as per the tax form)

I indicated net income above but this may not be correct?

C.


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## Nerd Investor (Nov 3, 2015)

cyndiloo said:


> One more question - when they say "earned income" do they mean total income or net income? (as per the tax form)
> 
> I indicated net income above but this may not be correct?
> 
> C.


Hi, 

It lags by a year. So in your case, you would take your 2015 limit from your 2014 Notice of Assessment (A), add 18% of 2015 earned income (B) and from there you need to subtract any contributions you made to your RRSP for the 2015 tax year. If you have any kind of work pension plan, there are other deductions you have to pick up as well. You do not add in 18% of your 2016 earned income (C), that will factor in to your 2017 limit. 

So to sum up, A + B - RRSP contributions for 2015 

"Earned Income" referes to Employment Income (T4), Net Business Income and Rental income.

Hope that helps. If you do have any sort of work pension, please let us know so we can break down what to look for.


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## Eclectic12 (Oct 20, 2010)

cyndiloo said:


> ... I need some help figuring out my RRSP contribution limit for my 2016 tax return. Is the following correct?
> ... So in calculating my 2016 RRSP contribution limit - it would be A + B + C?


I doubt it ... first issue is that "earned income" is not necessarily the same as one's income on the tax return. If I recall correctly, investment dividend income will be excluded from "earned income" but would be included in "Net Income".

Second issue is that there are bunch of other factors that may come into play. For example, where one is in a company pension - a pension adjustment (PA) will reduce the "18% x earned income" so that less RRSP contribution room than expected is available.

Here is a relatively good explanation ... http://www.taxtips.ca/rrsp/rrspcontributionlimits.htm

It may help the more detailed steps that CRA has on their link. It has the detailed steps for using the 2015 earned income to calculate the 2016 deduction limit.
http://www.cra-arc.gc.ca/E/pub/tg/t4040/t4040-e.html#chrt_3


(I don't think it changes much so whenever they update it it, likely the main changes will be "2016 earned income" to calculate the "2017 deduction limit" plus what the new "RRSP limit for 2017" is [$26,010 ].)


Keep in mind that the "deduction limit" from the full range of steps not only figures out how much RRSP contribution room was added by the 2015 earned income but also includes any contributions made in 2015 but that have not yet been deducted from income. I'd have to read it thoroughly to be sure but where you have always deducted the RRSP contributions made and you are sure the available RRSP contribution room has been used up ... you probably only care about Steps two through six.

The formula is set to ensure at least $600 is granted.


Cheers


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## gardner (Feb 13, 2014)

Nerd Investor said:


> add 18% of 2015 earned income (B)


Up to a maximum of $25,370 (18% of $141,000) for the 2016 tax year.

http://www.cra-arc.gc.ca/limits/


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## Nerd Investor (Nov 3, 2015)

gardner said:


> Up to a maximum of $25,370 (18% of $141,000) for the 2016 tax year.
> 
> http://www.cra-arc.gc.ca/limits/


Excellent point, without knowing his income I should have added that in.


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## cyndiloo (Feb 9, 2017)

Hi all,

Thank you for the answers...I have no company pension plan contributions since 2012 

I now understand the 0.18 of 2016 earnings up to the max yearly limit set by CRA (as per their definition of what can be included) is for 2017...

Thank you so much! This has saved me from making a significant mistake.

Take care,

C.


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