Sam is making his 1st Registered Retirement Savings Plan contribution.he wants to calculate its max and his 2019 personal income tax return ?

Question

It is February 13, 2020 and Sam just turned 18 year’s old (resident of Quebec). He has been working part-time since he was 16 year’s old and is looking at making his first Registered Retirement Savings Plan (RRSP’s) contribution. Before going to the bank tomorrow, he wanted you to calculate the maximum that he could contribute and claim as a deduction on his 2019 personal income tax return 

  

Yannick’s gross salary:  

2018 (16 years old): $4,000  

2019 (17 years old): $5,000  

2020 (18 years old): $10,000  

  

RRSP annual limits: 

year 2016: $ 25370 

    2017: $ 26010 

2018    : 26230 

2019    : 26500 

2020    : 27230 

  

Answer 1

As RRSPS are regulated under Federal Law, there are not any specific rules for those living in Quebec that differs from the rest of the country. In Canada, the calculation for your annual RRSP contribution is as follows:

18% of previous year's employment income + carry forward amounts (all previous years) - pension adjustments. As long as you have had income, regardless of your age, you are entitled to make RRSP contributions.

For the calendar year 2019, there is only one previous year of earned income for our example. In that case, this is an easy calculation of simply 0.18 multiplied by $4,000, equal to $720.

This amount will be carried forward if not utilized for the calendar year.