Weekly Tax Tips
Ensure that your 2011 earned income allows the maximum 2012 RRSP contribution
Date: 15 Jul 2011
Your right to make an RRSP contribution for one year depends on your earned income for the previous year. For 2012, your contribution will be limited to 18% of your 2011 earned income, to a maximum of $22,970. Therefore, you need at least $127,611 of earned income in 2011 to maximize your 2012 contribution. This limit is further reduced by your pension adjustment for 2011.
In general terms, earned income is income you receive from employment, business or the rental of real property, as well as any alimony and taxable maintenance. It is reduced by business or rental losses and any alimony and maintenance payments made. If you have some control over your income level, ensure that it's high enough to allow the maximum RRSP contribution. For instance, if you carry on business through a corporation, ensure that your 2011 salary is at least $127,611 to allow a full $22,970 contribution in 2012.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 15 Jul 2011.
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