RRSP contribution confusion

Zoomer | January 1st, 2006


Q

– I have a question about RRSPs. My deduction limit for 2002 is $6818. I have no earned income in 2002. Can I still contribute to the RRSP and claim it? How much earned income would I need in 2002 in order to contribute $6,818 and claim it? – L.F.


A

– If you have existing contribution room, it doesn’t matter how much earned income you have in 2002. You can make a contribution based on 2001 or prior years. However, if you have no earned income, you may not have much in the way of taxable income against which to claim a deduction.

Your RRSP contribution limit for the current year (2002) is based on 18% of your prior year’s earned income (2001), plus any carry-forward credits you may have.


If you use all your current contribution room in the 2002 tax year and then want to contribute another $6,818 for the 2003 tax year, you would need to have earned income in 2002 of $37,878. – G.P.