Personal Taxation Q 'n A

Your RRSP limit is based on your prior year’s earned income calculation subject to limits. In addition, your limit is cumulative. If you do not use your limit in a particular year, it will carry forward indefinitely.

Your earned income includes employment earnings, net of any union dues or employment expenses, self employed earnings, rental income, disability pensions under CPP, alimony payments, profit sharing allocations, supplementary unemployment benefit plan payments less, losses from self employment, alimony paid and rental losses.

The calculation is based on 18% of your earned income to a maximum of $26,230 for 2017. There are adjustments for those individuals who are members of a registered pension plan. Your RRSP limit for any particular year is stated on your notice of assessment for the prior year.

CRA allows a lifetime over-contribution limit of $2,000 without penalty. This over-contribution is not deductible, but is allowed to earn income within your RRSP. Any contributions greater than $2,000 are subject to a penalty of 1% per month.

You may also refrain from deducting your RRSP in a given year even though you have eligible room. In a year when your income is low and it is expected to be higher in a following year, it may make sense to defer the deduction to the later year.