Annual RRSP Deduction Limits

February 03, 2010 By: M. El-Ayari Category: Retirement Planning

The maximum RRSP contribution amount that can be deducted is called the “RRSP deduction limit”. It is also referred to as your “contribution room” or “deduction room”. Your deduction limit is found on your Notice of Assessment or Notice of Reassessment that you receive each year after you file your tax return from Canada Revenue Agency.

Your 2010 limit would be on your 2009 Notice. The deduction limit is calculated as:

(1) 18% of “earned income” for the preceding year, to an annual maximum (see following table)

(2) less the “pension adjustment” amount, for participants in a Registered Pension Plan (RPP) or Deferred Profit Sharing Plan (DPSP)

(3) less any “past service pension adjustment”, for participants in a RPP or DPSP

(4) plus any “past service pension adjustment” reversals

(5) plus unused deduction room carried forward from the previous year

The annual limits for RRSPs, money purchase (defined contribution) RPPs and defined benefit RPPs are:

Year

Annual Contribution Limits

Defined Benefit
RPPs - Max Pension
Benefit per
Year of Service

RRSPs

Money
Purchase (MP)
RPPs

2005

$16,500

$18,000

$2,000.00

2006

$18,000

$19,000

$2,111.11

2007

$19,000

$20,000

$2,222.22

2008

$20,000

$21,000

$2,333.33

2009

$21,000

$22,000

$2,444.44

2010

$22,000

$22,450

$2,494.44

2011

$22,450

indexed

1/9 the MP limit

2012

indexed

indexed

1/9 the MP limit

The DPSP limit is 1/2 of the MP limit each year. The MP limit and DPSP limits for pension adjustment (PA) purposes are also restricted to 18% of compensation.

For each year after 2009 for RPPs and 2010 for RRSPs, the limits will be indexed for inflation using the Industrial Aggregate average wages and salaries in Canada.

RRSP limits lag behind RPP limits by one year because RRSP limits are based on prior-year earnings, and RPP limits are based on current-year earnings.


Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca


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