Can IPP plan members take a $48,730 Personal Tax Deduction in 2015?

YES. If your T4 income (salary/bonus) is at least $140,000 you can contribute $24,930 to an RRSP. If you become an IPP plan member in the same year, and start a combination plan with Defined Contribution (DC) component, you can take an additional personal tax deduction of $23,800.


Corporation (DC): $ 1,400 ( 1% / 140,000)
Owner/Employee: $ 23,800 (17% / 140,000)
Total $ 25,200 (18%)

Your IPP contributions will generate a Pension Adjustment of $25,200, which will impact your RRSP contribution in the following year (2016). Thus, in the current year, your personal tax deduction is the sum of:

RRSP $ 24,930
DC IPP $ 23,800
Total $ 48,730

Note that the RRSP contribution limit can be reduced if the IPP member had any earned income from any employer or self-employment in the year 1990. It is important to remember that a special rule applies to connected persons such as members of IPPs, if they had earned income in the year 1990, which can grind down their 2015 RRSP contribution room. Most people born after 1972 are typically not impacted by that rule since they are under the age of 18 years.

To learn more about the IPP, contact us to speak to an advisor and receive a complimentary retirement illustration.

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