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Earned income is the pay from work that the CRA counts when it works out your RRSP room. The rule is 18% of last year’s earned income, up to a dollar limit of $33,810 for 2026. If you earned $90,000 last year, that’s $16,200 of new room.
What counts as earned income?
The CRA describes it as your employment earnings, your self-employment earnings and certain other types of income, minus specific employment expenses and business or rental losses. That’s the whole definition on its page, and the detailed list sits in Chart 3 of guide T4040.
So what’s left out? The CRA page doesn’t list investment income or pension income as part of it, and we didn’t find a page that says they count. If a large part of your income comes from dividends, interest or a pension, don’t assume it builds room. Look at Chart 3, or at the limit the CRA reports for you, before you plan a contribution.
One thing surprises salaried people: the figure isn’t the same as the salary on your contract. Employment expenses come off, and so do business losses if you have a side business that lost money. Your earned income can end up lower than you’d guess.
How much RRSP room does earned income give you?
Room for a given year uses your income from the year before. Your 2026 limit comes from 2025 earned income. The formula on the CRA page is unused room from earlier years, plus the lesser of 18% of last year’s earned income or the dollar limit, minus your pension adjustment.
| Earned income last year | 18% of it | New room |
|---|---|---|
| $40,000 | $7,200 | $7,200 |
| $90,000 | $16,200 | $16,200 |
| $150,000 | $27,000 | $27,000 |
| $200,000 | $36,000 | $33,810 (dollar limit) |
The cap bites at about $187,834. Above that earned income, extra pay adds no more room. The dollar limit was $32,490 for 2025 and $33,810 for 2026, according to the CRA, and the CRA’s what’s new page for plan administrators already lists $35,390 for 2027. So a high earner who earned over the cap in 2026 will see a bigger ceiling next year.
Meet Amir, a nurse in Winnipeg who earned $75,000 last year and has no pension plan. Eighteen percent of $75,000 is $13,500, well under the dollar limit, so $13,500 of new room lands in his account. If he has $1,000 of unused room from earlier years, his total is $14,500. Nobody called him, and he didn’t fill in a form: the CRA works it out from his return.
A worked example with a pension
Say you earned $60,000 last year and belong to a workplace pension. Eighteen percent is $10,800. Your employer reports a pension adjustment of $5,000 for the year, and that comes straight off, leaving $5,800. Add $2,000 of room you didn’t use before and you have $7,800.
The RRSP calculator gives the same $7,800 when you enter those three figures. It also tells you what a contribution saves. In Ontario the tax saving on a $10,000 contribution shows as $2,965, about 29.6% of it, at the taxable income we entered. But a $10,000 contribution against $7,800 of room leaves you $2,200 over. The calculator flags a penalty of 1% a month once you pass the $2,000 buffer.
Where do you find your own number?
Your own limit is the one the CRA reports to you. We couldn’t confirm from the pages we read exactly where it appears, so look at your latest notice of assessment and your CRA online account. That figure includes carry-forward room, and your own arithmetic can’t see that.
Check it before you choose how much to put in. To see how a contribution could grow over the years, use the retirement calculator.
What if you had no earned income last year?
Then no new room is added for this year. Students, people on parental leave without other earnings and people living on investments can all land here. Room you already built up stays, and it carries forward, so it isn’t lost. If you’re in this spot, check the figure in your CRA account before you move money, because a deposit above your limit can cost you tax, and tax time is a bad moment for surprises.
Mistakes people make with earned income
The first is using this year’s income. Room is built from last year, so a big raise doesn’t lift this year’s limit. It lifts next year’s.
The second is forgetting the pension adjustment. If your employer has a pension plan, your room is smaller than 18% suggests.
The third is ignoring what tax you’ll actually save. A contribution lowers your income tax, but the saving is a deferral, since withdrawals are taxed as income later. Compare the two sides with the income tax calculator, then check what a withdrawal would cost with the RRSP withdrawal tax calculator.
We didn’t cover the 60 day rule for 2026, because the deadline for the 2026 tax year isn’t on a CRA page we read. Check the CRA page in the new year.
Where the numbers come from
The 18% rule and the definition of earned income come from Canada Revenue Agency pages on RRSP deduction limits. The 2025 and 2026 dollar limits come from the CRA table of RRSP and pension limits. The worked example uses our 2026 calculator, checked in September 2026. No level of government runs or endorses this site.
Frequently asked questions
What is earned income for RRSP purposes?
The CRA adds employment earnings, self-employment earnings and certain other income, then subtracts specific employment expenses and business or rental losses. Chart 3 of guide T4040 has the details.
How much RRSP room do I get for 2026?
The lesser of 18% of your 2025 earned income and $33,810, plus unused room from earlier years, minus your pension adjustment.
At what income do I hit the RRSP dollar limit?
About $187,834 of earned income, since 18% of that equals $33,810.
Does investment income count as earned income?
We found no CRA page that lists it as earned income. Check Chart 3 of guide T4040 or the limit the CRA reports for you.
What happens if I contribute more than my room?
Our calculator flags a 1% a month penalty once you are over the $2,000 buffer. The CRA page on over-contributions has the full rules.
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