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Ontario|Investments & SecuritiesRRSPs and RRIFs 267 Contribution limits and types of RRSP investments There is a limit on the amount of money you can contribute to your RRSP each year, and there are a variety of RRSP investments from which to choose.
- Contribution limits
Your contribution limit is determined by your earned income, up to a limit that is set by the Government of Canada. Canada Revenue Agency shows you how much contribution room you have available on the Notice of Assessment they send you after you file your previous years' tax return.
The Government allows you to contribute 18% of your earned income from the previous year, up to a maximum set dollar limit. The dollar limit for 2000 is $13,500 minus any pension contributions. For example, if your earned income was $45,000 in 1999, you can contribute a maximum of $8,100 to your RRSP in 2000, which is 18% of $45,000. However, if your earned income was $100,000 in 1999, you can only contribute a maximum of $13,500 to your RRSP in 2000.
- Unused contribution
You are also allowed to add your unused RRSP contribution amount to your current contribution limit. For example, if you could have deposited $10,000 last year, but you only contributed $9000, you can add $1000 to your contribution limit for this year. The contribution limit that is shown on your Notice of Assessment includes the amount of your unused contribution. You can also find out what your RRSP contribution limit is by calling the Canada Revenue Agency TIPS hotline. The number is listed in the Blue pages of the telephone book. If you belong to a company pension plan or deferred profit sharing plan, your RRSP contribution limit will be lower than these general limits. If you contribute more than the amount allowed, you may have to pay a penalty.
You should be sure to check the details of the RRSP investment you decide to buy to determine whether your investment suits your needs. If you are unsure how to calculate your contribution limit, or if you do not know what type of investment is best for you, you should contact an Investment Advisor or an accountant for advice.
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