Your right to make an RRSP contribution for one year depends on your earned income for the previous year. For 2020, your contribution will be limited to 18% of your 2019 earned income, to a maximum of $27,230 plus any carry-forward contribution room that you may have. Therefore, you need at least $151,278 of earned income in 2019 to maximize your 2020 contribution. This limit is further reduced by your pension adjustment for 2019 and pooled registered pension plan contributions for 2020.
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, make sure that you have factored in the ability to make RRSP contributions to your decision of whether to earn a salary rather than dividends. Your BDO tax advisor would be pleased to provide further details.
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 June 20, 2019.