RRSP Centre

• Self-Directed RRSP
• Deduction Limit
• Spousal RRSP
• Investment Options
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• How Much Will I Need to Save?
• RRSP Maturity Options
• Annuities
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• How Much Income Will I Need?
• How Long Will My RRIF Last?
• Naming a Beneficiary
• Retirement Planning for Small Business Owners

RRSP Centre

RRSP Deduction Limit
Your RRSP deduction limit is calculated using the previous year's earned income. This means that your 2009 RRSP contribution room will be based on your 2008 earned income.

The sources of income that qualify as earned income include:

• net employment and business income,
• disability payments from the Canada Pension Plan or the Quebec Pension Plan,
• royalties,
• net rental income,
• taxable alimony and separation allowances received,
• net research grants,
• employee profit sharing plan allocations and
• supplementary unemployment benefit plan payments.

Items that reduce earned income include:

• net rental losses,
• alimony or separation allowances paid,
• union or professional dues and
• employment expenses.

The easiest way to find your RRSP contribution room (or as Canada Revenue Agency [CRA] calls it, your deduction limit) is to look it up on the Notice of Assessment that CRA sends you after you file your annual income tax return. If you would like to verify the amount CRA says you may contribute to your RRSP, here's how to calculate it for yourself.

For 2009, your RRSP deduction is calculated by adding any RRSP deduction room you carried forward from 2008 to the lesser of $21,000 or 18% of your 2008 earned income.

If you are a member of a Deferred Profit Sharing Plan (DPSP) or Registered Pension Plan (RPP), you have one and possibly two more steps. You must deduct your pension adjustment (PA) and if you have a net past service pension adjustment (PSPA), you must also deduct that amount.

For more information, contact an Investment Advisor at a BMO Nesbitt Burns branch near you.

If you would like a BMO Nesbitt Burns Investment Advisor to contact you, simply complete this brief contact form.

Note: Using borrowed money to finance the purchase of securities involves greater risk than a purchase using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the securities purchased declines.