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How much are you allowed to contribute?

Individuals who file income tax returns with the federal government receive a notice of assessment, like the one shown below, several weeks later indicating their personal information.

The important number is in the last line: "RRSP deduction limit for 2010". This is the amount you should contribute before March 1, 2011 to benefit from a deduction in the computation of your taxable income for 2010.

Note that this notice combines all your unused RRSP contribution room since 1991, which can be carried forward indefinitely.

The different pension adjustments (PA, PSPA, PAR), only concern workers who contribute to a private pension plan (also called "pension fund") with their employer.

The second part of this notice indicates contributions already paid into an RRSP but not yet deducted because of a requirement or by choice. This amount (B) can be carried forward and deducted in a subsequent return, up to the maximum deductible granted for the year in question.

Note that if the result of B (unused contributions) minus A (RRSP deduction limit) is greater than $2,000, you could have to pay a penalty.

Example of a notice of assessment:

2010 RRSP Deduction Limit Statement

RRSP deduction limit for 2009		$5,100
Minus: allowable RRSP contributions deducted in 2009		$3,500
Unused RRSP deduction limit at the end of 2009		$1,600
Plus: 18% of 2009 earned income of $40,000 (max. $22,000)	$7,200
Minus: 2009 pension adjustment (PA)	$4,100	$3,100*
		$4,700
Minus: 2010 net past service pension adjustment (PSPA)		0
Plus: 2010 pension adjustment reversal (PAR)		0
RRSP deduction limit for 2010		$4,700	(A)

You have $0 in unused RRSP contributions (B) for 2010. If this amount is greater than the amount for (A) above, you could have to pay a penalty.

* This amount cannot be less than 0.