Certainly! When it comes to RRSP (Registered Retirement Savings Plan) contributions, understanding what qualifies as earned income is crucial. Here are the key points:
Earned Income:
- Earned income includes:
- Net income from self-employment: This refers to the profit you earn from a business you own or operate as a self-employed individual.
- Net rental income from real property: If you receive rental income from properties you own, it qualifies as earned income.
- Payments from supplementary unemployment benefit plans (not Employment Insurance): These payments count as earned income.
- Taxable alimony or maintenance payments received: If you receive alimony or maintenance payments that are taxable, they contribute to your earned income.
Income Sources That Do Not Qualify as Earned Income:
- The following income sources do not qualify as earned income for RRSP purposes:
- Investment income: This includes earnings and gains from investments such as interest, dividends, and capital gains.
- Pensions: Income from pensions, including those from Deferred Profit Sharing Plans (DPSP), Registered Retirement Income Funds (RRIF), Old Age Security (OAS), and Canada Pension Plan/Quebec Pension Plan (CPP/QPP), does not count as earned income.
- Retiring allowances: Payments received upon retirement are not considered earned income.
- Death benefits: These benefits are also excluded from earned income.
- Taxable capital gains: Any gains from selling capital assets are not part of earned income.
- Limited-partnership income: Income from limited partnerships does not qualify.
Remember that understanding these distinctions helps you make informed decisions about your RRSP contributions.
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