When determining how much you can contribute to RRSPs, keep in mind there is at least one more step to the calculation for members of Registered Pension and Deferred Profit Sharing Plans.

Ordinarily, your deductible contributions to RRSPs are limited to 18 per cent of your prior year's earned income, to a maximum of $19,000 for 2007.

If you are a member of a Registered Pension Plan or a Deferred Profit Sharing Plan, this amount is reduced by the pension adjustment amount(s) reported on your prior year T4 slips. A pension adjustment reflects the value of the future benefit to which you are entitled as a result of being a plan member for the year. Your 2007 RRSP deduction limit is on your 2006 Notice of Assessment and should already reflect the 2006 pension adjustment on your T4(s).

Your unused RRSP deduction limit room as shown on your prior year's Notice of Assessment will confirm the net accumulated amount you can contribute based on 2006 and prior years. There may be other adjustments to your RRSP deduction limit if there have been significant changes to your Registered Pension Plan coverage during the year.

Information for Tax Tips is provided as a public service by the Chartered Accountants of British Columbia.