RRSP Help - Frequently Asked Questions

What is earned income for RRSP purposes?

Earned income includes the total of income from employment, income from a non-incorporated business, income from rental of real property, royalties and alimony received LESS the total of losses from a non-incorporated business, losses from rental of real property and alimony paid. Earned income excludes pension income, retiring allowances, investment income, and income earned while a non-resident of Canada.

Do I have to wait until the government notification before I can make my 2007 RRSP contribution?

No. It's possinle to make your full RRSP contribution for 2007 at any time in 2007.Actually, the earlier you make your contribution the more you maximize the tax effectiveness of the retirement savings plan. However, some prefer to wait until later in the year (the deadline is March 1, 2008). You can expect your government report for your 2007 RRSP room along with your 2006 income tax assessment some in May or June.

Am I allowed to over-contribute to my RRSP?

Simply put, Yes.
The current taxation system allows for a $2,000 lifetime over-contribution without incurring any penalty. Though you are not allowed any tax deduction on over-contributions - unless they are applied against successive tax year. The interest income is accumulated on a tax-sheltered basis, therefore, while double taxation may eventually occur, tax deferral on the investment income may compensate for the tax consequences. It's strongly recomended to consult your financial advisor prior to making any over-contributions.

Can I make a spousal RRSP contribution?

This continues to be possible to the extent of your own RRSP room. Financial planners consider this as a good way to split income at retirement, and see this as particularly advantageous if your spouse has a significantly lower salary or is not in a pension plan. You would receive the tax deduction on your tax return for the amount of the allowable spousal RRSP contribution. Since the RRSP is in your spouse's name, it would eventually be taxed at your spouse's tax rate when the spousal RRSP is accessed.

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