RRSP FACTS

T’is the Season, here are the facts on contributions:

To see how much you can contribute to your RRSP for 2011, refer to your Notice of Assessment, which can be found on your last year’s tax return.

Maximum Contribution for 2011

18% of 2010’s earned income; to a maximum of $22,450

Earned Income

Earned income is income you have received for work you have done.  It includes the annual total of:

·         Net employment income

·         Net income from a business or partnership

·         Net rental income

·         Net research grants

·         Taxable disability benefits

·         Supplementary unemployment benefits

·         Taxable alimony, maintenance or child support

·         Certain royalty income

Not Included in Earned Income

·         Investment income

·         Taxable capital gains

·         Limited partnership income

·         Death benefit (from Life Insurance)

·         Retiring allowance

·         Pension or DPSP income payments from RRSP, OAS, CPP or QPP

Contribution Rules

·         Unused contribution room can be carried forward indefinitely (subject to age limits)

·         Contributions are deductible for the previous year if made within 60 days of year end

·         Contributions may be carried forward indefinitely and deducted in future years

·         Contributions to an RRSP may be made up to and including the year in which you turn 71yrs

·         By December 31 of that year (age 71), RRSPs must be deregistered or transferred to a Registered Retirement Income fund (RRIF) or an annuity

Over-contribution

You may contribute up to $2000 above your contribution limit without penalty.  However, the over contributed amount will not be allowed as a tax deduction and the amounts over $2000 will be subject to a 1% per month penalty tax.  Unused contribution room can be carried forward indefinitely; subject to age limits.

Spousal RRSP

·         Contributor claims the deduction for a spousal RRSP

·         Deduction limits are based on the contributor and not the spouse

·         Plan and assets are controlled by the spouse

·         Contributor (not the spouse) pays taxes on withdrawals, if withdrawals are made within the first three years after contribution.

·         Contributions to a spousal plan may be made up to and including the year the spouse turns 71, as long as the contributor has earned income.

If you have any questions or need to make this year’s contribution, don’t hesitate to give me a call. 

Have a great weekend,

Tracey

Source:  Dynamic Funds