Understanding the Basics - Servus Credit Union

What is Earned Income?Your RRSP deduction is based on your prior year’searned income. The following qualify as earned income:• salary, wages, bonuses and taxable fringe benefits(minus union or professional dues and employmentexpenses claimed as deductions)• taxable wage loss replacement or long-term disabilityincome resulting from employment• Canada Pension Plan disability benefits• amounts received under the Wage Earner ProtectionProgram Act• net income from self-employment(minus current year business losses)• net rental income from real estate(minus current year rental losses)• taxable alimony or maintenance payments received• royalties of an author or inventor• net research grantsNOTES:1. Earned income must be reduced by deductible alimony or maintenancepayments.2. Interest, dividend, capital gains income, and E.I. benefits, do not qualifyas earned income.3. Income which is not taxed, such as Workers’ Compensation and welfarebenefits, cannot be used as earned income.A worksheet is provided on page 38 of this booklet toassist you in calculating your earned income. CRA alsoprovides a form for the calculation of earned incomein its Guide T4040 RRSPs and Other Registered Plansfor Retirement.RRSP Deduction LimitsYour Notice of Assessment from CRA, received afterfiling your tax return, will state your RRSP deduction limitfor the following year. At certain times of the year, youcan also phone the CRA Tax Information Phone Service1.800.267.6999 (TIPS) to confirm your deduction limit.The calculation of the amount will depend on whether youare a member of a pension plan, and if you are, the type ofpension plan.UNDERSTANDING ALL THE BASICS 3