|
Do You Really Know the RSP Rules?
Although it has many excellent features, the RSP is governed by a set of relatively complex rules and provisions. We summarize the main ones below.
Contribution limits
RSP contribution limits – technically called “deduction limits” – are based on your previous year’s income. Each spring or summer, the Canada Revenue Agency – formerly Revenue Canada – prints your limit on the Notice of Assessment it sends after processing your tax return for the previous year. That’s convenient, but the information arrives too late for those who recognize the benefits of contributing early. Here, we explain how to determine your own limit. Your Investment Advisor will gladly help you apply this to your own situation.This table shows maximum deductible limits currently planned, plus the income required to qualify for them. The government revises the contribution rules from time to time, so we encourage you to check with your Investment Advisor or consult our annual publication, The RSP Express.
You are also allowed to exceed your limit by $2,000 without penalty. That is a cumulative lifetime limit; you do not get $2,000 of extra contribution room each year. Excess contributions beyond that limit face a penalty tax of 1% per month.
|
Yearly Contribution Limits
|
|
Year
|
Maximum
yearly contribution
|
Previous year’s earned income required to be able to contribute the maximum amount
|
|
2008
|
$ 20,000
|
$ 111,111
|
|
2009
|
$ 21,000
|
$ 116,667
|
|
2010
|
$ 22,000
|
$ 122,222
|
|
2007
|
Indexed
|
Indexed
|
| |
From 2007 on, the RSP limit will be indexed to growth in the average national wage.
|
