RRSP/PRPP/SPP Deduction Worksheet

Enter all the contributions made during the year to the taxpayer and for the benefit of the spouse.

If the taxpayer is over 71 years of age, the program only allows the following RRSP contributions:

• Contributions carried over from previous years; or
• Contributions paid in the current year or in the first 60 days of the next taxation year to a spousal plan if the spouse is under 72 at the end of the year.

If an amount was withdrawn from the RRSP under the Home Buyers' Plan (HBP), the taxpayer may be required to designate, in whole or in part, the RRSP/PRPP contributions as the annual repayment of the amount withdrawn. Any such designated contributions cannot also be used towards the RRSP/PRPP deduction.

Also, when the taxpayer designates, in whole or in part, his or her contributions as a refund to the Lifelong Learning Plan (LLP), the amount thus designated can only give rise to a deduction.

Certain RRSP contributions may also qualify for a Labour-sponsored funds credit against federal and/or provincial taxes payable. Contributions to such plans should be entered in the appropriate sections of Form T5006, Labour-sponsored funds tax credit.

For Québec residents, the contributions must instead be entered on the RL-10 slip Tax credit with respect to a Labour-sponsored fund (FTQ).

Note: Contributions should be carefully allocated by the period (during the current year/in the first 60 days) contributed so that Part X.1 tax may be properly calculated. Note that Part X.1 tax may be assessed on undeducted contributions to an RRSP. If an excess amount is indicated, obtain Form T1-OVP from the CRA.

The maximum deduction for contributions paid to an RRSP/PRPP is based on the earned income of the preceding year, which is rolled forward.

If the previous year’s earned income is not entered, the deductible amount for the year will be NIL. To confirm the deduction limit, compare it with the Notice of Assessment or the T1028 form sent by the CRA for the preceding year. Note that the deduction may exceed the annual limit when some eligible income is transferred to an RRSP/PRPP and/or an RPP and an election is made on Form RRSP/PRPP/RPP TRANS, Designation of Amounts Transferred to an RRSP/PRPP and/or an RPP.

The regular deduction for contributions made to an RRSP/PRPP corresponds to the lesser of the following amounts:

• Contributions made after considering transfers to an RRSP/PRPP and the impact of a withdrawal under the Home Buyers’ Plan (HBP) the Lifelong Learning Plan (LLP) and of the portion of contribution designated as a refund for HBP and LLP;
• For the previous taxation year, the unused RRSP deduction room at the end of the year less the past service pension adjustment (T215) plus the pension adjustment reversal (T10) plus the excess of the lesser of $26,500 or 18% of earned income for that year over the pension adjustment for the taxation year (T4, box 52 or T4A, box 34).

The RRSP deduction limit for the current taxation year can be found on the most recent notice of assessment or on the T1028 form. If the total amount of the RRSP deduction limit for a given year is not used up, the unused portion is carried forward to the subsequent year. The deduction limit shown on the notice of assessment includes this unused portion carried forward from the last and preceding taxation years.

In addition, you can complete Form T1028 - RRSP/PRPP/FHSA Information or Notice of Assessment (Jump Code: 1028) using the notice of assessment or Form T1028 sent by the CRA in order for the program to grant an RRSP/PRPP deduction for the current taxation year.

Note: The program calculated the unused RRSP deduction room at the end of the previous taxation year. However, you should ensure that this amount corresponds to the amount shown on the notice issued by the CRA.

The RRSP Earned Income Worksheet is now on Form RRSP EI, RRSP Earned Income Worksheet (Jump Code: RRSP EI).

The next taxation year’s RRSP Deduction Limit calculation is used to determine the maximum RRSP deduction for the following year.

The amount of unclaimed contributions made before the next taxation year corresponds, for purposes of calculating the amount liable for Part X.1 tax in the current taxation year, to the excess of the contributions made over the current taxation year’s RSP deduction limit irrespective of the pension adjustment for net past services for the current taxation year as the result of the calculations below:

A + B + R + C + D + E where:

A = the unused deductions to a personal RRSP at the end of the previous taxation year;

B = the excess of the least high RRSP contribution limit for the year and 18% of the income earned by the taxpayer on the total of PA for the current year and the SPP for the year;

C = $2,000;

D = the amount related to a group RRSP;

E = the transition amount (contributions paid before February 27, 1995);

R = the total corrected pension adjustment for the individual for the year.

The calculation of the "cumulative excess" takes into consideration the $2,000 threshold.

The contributions can be left in the RRSP/PRPP where they have been or will be deducted, as contributions for the years starting in 1996, up to a limit of $2,000. A diagnostic will appear in this regard.

Contributions to an RRSP/PRPP which exceed the deduction limit for the year can be refunded to the taxpayer. In such a case, the taxpayer will receive a T4RSP slip on which the refund amount is entered in box 20. You must then proceed as follows:

• make sure that the amount of the refund is entered in box 20 on the T4RSP slip screen ; the program reports that amount on line 12900 of the T1 Jacket, on Form T746 and also on this worksheet.
• complete Form T746, Calculating your Deduction for Refund of Unused RRSP Contributions in order for the taxpayer to claim the deduction on line 23200 of the T1 Jacket.
• make sure that the excess contribution is included in the amount entered on the appropriate line in the "Calculating your undeducted RRSP contributions" section at the top of this workchart.

Note: Transitional provisions were made for excess contributions already made on February 26, 1995, that did not exceed the $8 000 threshold.

If the taxpayer made excess contributions to his or her RRSP/PRPP, he or she may have to pay a tax of 1% on these contributions for each month in which he or she leaves in them in his or her RRSP/PRPP. If this is the case, complete Form T1-OVP, Individual Income Tax Return for RRSP Excess Contributions available from the CRA.

This schedule designates the amount of qualifying income for transfer into the taxpayer's RRSP/PRPP and/or RPP.

If there is income eligible for transfer to an RRSP/PRPP and an RRSP contribution has been made, the program will designate a transfer to Form RRSP/PRPP/RPP TRANS, Designation of Amounts Transferred to an RRSP/PRPP and/or an RPP (Jump Code: RRSP/PRPP/RPP TRANS). This preserves the carry forward of the unused RRSP/PRPP contribution room for future use.

The program performs RRSP/PRPP transfers in the following order: 60(l) and 60(j.1). Automatic transfers are made correctly if the taxpayer’s date of birth is shown on the Identification form.

When calculating the automatic transfers of eligible amounts to an RRSP/PRPP and/or RPP, the program first identifies any eligible income and then transfers this income in the order given below to the maximum of all contributions made to an RRSP/PRPP. If, after performing the transfers, the program calculates that contributions to an RRSP/PRPP have not been entirely used up, it will then calculate the RRSP/PRPP deduction provided under subsection 146(5).

Payments resulting from the carry forward, in whole or in part, of RRSP/PRPP annuities, payments exceeding the minimum amount to be withdrawn from a RRIF, which have been transferred directly by the issuer, and RRSP/PRPP refunds of premiums following the spouse’s death, are all eligible for transfer under paragraph 60(l).

To claim an RPP deduction on line 20700 of the T1 Jacket, the appropriate designation must be made and an RPP contribution indicated on Form RRSP/PRPP/RPP TRANS, Designation of Amounts Transferred to an RRSP/PRPP and/or an RPP.

See Also

RPP Deduction Worksheet

Federal Income Tax and Benefit Guide – Lines 20700 and 31400

The program optimizes RRSP/PRPP's (line 20800). It must be determined how much of an RRSP/PRPP deduction the taxpayer needs to reduce his taxes to zero in consideration of his or her income and the deductions or credits which cannot be carried forward. In the case of dependant amounts, it must be ensured that the taxpayer and the spouse are able to use them in full.

It is taken for granted that the taxpayer will prefer to use RRSP/PRPP's before credits which can be carried forward.

RRSP/PRPP's are optimized before the following amounts:

• Medical expenses;
• Dependant amounts (line 31800);
• Losses;
• Capital gains deduction;
• Interest on student loans;
• Tuition fees;
• Charitable donations.

The child care expenses deduction is calculated after RRSP/PRPP’s.

Several diagnostics have been added to explain the scope of the optimization. It is also explained that the results must be verified, as several other factors can influence the taxpayer’s decision to utilize his or her RRSP/PRPP’s in full or not.