40 Questions
If an individual's earned income is $60,000, what is their annual RRSP contribution limit?
$10,800
What is the consequence of over-contributing more than $2,000 to an RRSP?
Penalty tax of 1% per month on the excess
When can an individual no longer carry forward their unused RRSP contribution room?
End of the year after turning 71
What is a way to avoid the penalty tax for over-contributing to an RRSP?
Withdraw the excess contributions
What is the penalty tax rate for over-contributions to an RRSP above $2,000?
1%
What is the maximum RRSP contribution limit for the year in question for Janice?
$27,830
How is the RRSP contribution limit calculated for Janice?
As 18% of her total income
Why are adjustments made to the RRSP contribution limit for participants in RPPs or DPSPs?
To account for pension adjustments and past service adjustments
How do RRSP contributions affect the income tax deductions for individuals?
They decrease the amount of income tax paid
What is one of the benefits of contributing to an RRSP?
It reduces the individual's taxable income
What is the deadline for contributing to a spousal plan after an individual turns 71 years of age?
December 31 of the year in which the spouse turns age 71
How are in-kind contributions valued when contributing to an RRSP?
At their current market value
If an individual contributes in-kind assets with a market value that exceeds the purchase price, what must be reported on their tax return?
The capital gain
What is the purpose of calculating an individual's annual RRSP contribution limit?
To determine the maximum amount one can contribute each year
How is the annual RRSP contribution limit calculated for an individual?
Based on 18% of the previous year's earned income, up to the maximum limit
What is the formula for calculating the annual RRSP contribution limit?
18% of previous year's earned income
Which of the following is NOT included in earned income for calculating RRSP contribution room?
Investment income
What component adjusts the RRSP contribution limit for participants in Registered Pension Plans?
Pension Adjustment (PA)
In the context of RRSP contributions, what is the purpose of the Notice of Assessment (NOA) provided by the Canada Revenue Agency?
Determining the maximum annual RRSP contribution limit
How does the Canada Revenue Agency calculate RRSP contribution room if an individual has unused RRSP deduction room?
Carries it forward to future years
If Jon and Craig each contribute $13,800 annually to their RRSPs, what will be the difference in their managed RRSP savings after 30 years?
$141,969
Under current RRSP legislation, who will have to make larger minimum withdrawals in the future between Jon and Craig?
Jon
What is the maximum RRSP contribution limit for Craig based on the information provided?
$4,000
How much can Jon contribute annually to his RRSP based on his earned income from last year?
$13,800
What strategy can Jon and Craig use to accumulate a similar total in their managed RRSP accounts?
Setting up a spousal RRSP
What is the benefit of carrying forward RRSP deductions for an individual expecting a significant increase in income?
To reduce total income in future tax years
How does contributing to an RRSP help with tax deferral on investment growth?
Income earned inside an RRSP is tax-sheltered until withdrawal
How does the ability to apply RRSP contributions to the previous year benefit taxpayers?
It enables them to carry forward unused deductions to future years
What is the impact of not deducting RRSP contributions from total income in the current year?
It allows for carrying forward unused deductions to future years
Which statement accurately describes the tax implications of withdrawing money from an RRSP?
Withdrawals are subject to immediate taxation at regular income rates
If Jon and Craig decide to split their RRSP contributions equally, how much will Jon contribute to a spousal RRSP annually?
$4,900
In Canada's progressive tax system, why would a couple earning $50,000 each pay less tax than one person earning $100,000 and the other earning $0?
Income splitting allows for lower overall tax due to progressive brackets.
What is the benefit of contributing to a spousal RRSP in the context of Jon and Craig's situation?
Income splitting for tax benefits
If Jon and Craig both earn $60,000 annually, what is a potential strategy they could use to maximize their RRSP contributions and tax benefits?
Splitting their contributions equally between managed and spousal RRSPs
How does contributing to a spousal RRSP impact the retirement savings of the contributor and the annuitant?
Both the contributor and annuitant benefit equally
What is a key advantage of contributing to managed RRSPs rather than spousal RRSPs?
More control over investment decisions
What is the primary reason for Jon to continue contributing $4,000 to a managed RRSP instead of allocating it towards a spousal RRSP?
Higher contribution room in a managed RRSP
What is the major consideration for an individual over 71 contributing to a spousal RRSP?
Requirement of earned income for contributions
What is the primary advantage of splitting contributions between managed and spousal RRSPs instead of allocating all funds to one account?
Optimization of retirement savings and tax benefits
How does contributing to an RRSP impact pension adjustments for individuals like Jon and Craig?
$0 impact on pension adjustments
Test your knowledge on how to calculate the maximum annual RRSP contribution limit using the average industrial wage and individual income. Practice determining the annual RRSP contribution limit based on specific criteria such as earned income and carry forward of unused RRSP room.
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