Planning your 2021 RRSP contributions
The RRSP deduction limit for the 2021 tax year is 18 per cent of pretax earned income or $27,830, whichever is less. For example, if you earned $90,000 in 2021, your RRSP deduction limit is 18% ´ $90,000 = $16,200. However, your Alberta Teachers’ Retirement Fund pension contributions reduce the amount you can contribute to a Registered Retirement Savings Plan (RRSP). Those amounts are recorded in box 52 on your T4 from your employer. This amount is then reported on line 206 of the Income Tax T1 General.
Pension adjustments (PA) reflect the value of contributions to your Alberta Teachers’ Retirement Fund. These earned amounts take up RRSP room.
The tax formula used to determine the benefit is (9 ´ yearly benefit) - $600.
Let’s look at an example of a teacher who earns $90,000. The yearly maximum pensionable earnings (YMPE) for 2021 is $61,600.
$61,600 ´ 1.4% = $862.40
$90,000 - $61,600 = $28,400 ´ 2.0% = $568.00
Yearly benefit is $1,430.40 (862.40 plus 568.00)
PA = (9 ´ $1,430.40) - $600 = $12,273.60
18% of $90,000 = $16,200
$16,200 – $12273.60 = $3,926.40
***If you have both a regular RRSP and a spousal RRSP, the deduction limit is the maximum amount you can contribute to all your RRSP accounts combined.
RRSP deduction limit vs contribution limit
The RRSP deduction limit differs from the contribution limit as it does not consider past unused RRSP contributions. The RRSP contribution limit reflects your current year maximum contribution, plus any unused contribution room from previous years. Your contribution limit is the total of this year’s deduction limit and any unused contribution room.
How to find your RRSP contribution limit
The Canada Revenue Agency (CRA) tracks individual contribution limits and reports this on the individual’s Notice of Assessment each year under the heading “Available Contribution Limit.” If you set up an account with CRA, you can also check your RRSP contribution limit online. Additionally, you can also access the status of your refund, check for benefit amounts, see previous years’ tax information and notices of assessment and make payments to your tax account.
Where to report RRSP contributions
You are required to report all RRSP contributions on line 208 of your T1 General Income Tax Return. Contributions made from March to December in each year are reported in the calendar year they are made. Contributions for the first 60 days of the next year can be reported in either calendar year. Your financial institution will provide you with RRSP receipts.
Understanding how your ATRF pension contributions reduce the amount you can contribute to an RRSP can help you better plan your retirement savings. Pension adjustments (PA) reflect the value of contributions to your Alberta Teachers’ Retirement Fund. These earned amounts take up RRSP room. Contact your financial planner/tax accountant with specific questions concerning your own RRSPs and tax account. #WEAREATA