Earned income for RRSP purposes is income from work or active business sources. It includes net employment income (T4 box 14 minus union dues), net self-employment income, net rental income from real property, royalties for works authored by the contributor, certain disability pensions from CPP or QPP, and some support payments received. It excludes investment income (interest, dividends, capital gains), Old Age Security, CPP retirement benefits, EI benefits, and pension income from a registered pension plan or RRIF.
Income that qualifies as earned income
| Income type | Qualifies? | Notes |
|---|---|---|
| Net employment income (T4) | Yes | Salary and wages from T4 box 14 less union and professional dues. Includes commissions and bonuses. |
| Net self-employment income | Yes | Net business or professional income from T2125, fishing income (T2121), farming income (T2042). |
| Net rental income (real property) | Yes | Rental income minus expenses from Form T776. Excludes net rental losses (those reduce earned income). |
| Royalties for own work or invention | Yes | Royalty income from a work or invention authored or invented by the taxpayer. |
| CPP or QPP disability pension | Yes | Specifically the disability portion. Retirement benefits do not qualify. |
| Support payments received (taxable) | Yes | Spousal support payments included in income on the T1 return. |
| Net research grants | Yes | Research grants minus eligible research expenses. |
| Supplementary Unemployment Benefit Plan payments | Yes | SUBP payments received from an employer top-up plan. |
Income that does NOT qualify as earned income
| Income type | Why excluded |
|---|---|
| Interest, dividends, capital gains | Investment income, not work income |
| Old Age Security | Government transfer, not earned |
| CPP or QPP retirement benefits | Excluded explicitly (disability portion is included) |
| Employment Insurance benefits | Government transfer |
| Pension income from RRSP, RRIF, or registered pension plan | Already received tax-deferred treatment |
| Workers compensation | Not classified as earned |
| Net rental loss | Reduces earned income; does not generate room |
| Death benefits and retiring allowances | Not classified as earned for RRSP purposes |
How earned income is calculated
The calculation is sum of all qualifying earned income for the year, minus deductions associated with that income (union dues, child care expenses claimed against employment income, employment expenses on Form T777, etc.). The result is multiplied by 18% to determine new RRSP room for the following tax year, subject to the annual dollar limit.
For a salaried employee earning $80,000 in 2025 with $1,200 in union dues and no other income: earned income equals $78,800 ($80,000 minus $1,200). New 2026 RRSP room from 2025 earnings is $14,184 (18% of $78,800), well below the $33,810 cap.
Self-employment earned income
Net self-employment income for RRSP purposes is the net business income from Form T2125 after deducting all eligible business expenses. Capital cost allowance (depreciation) reduces net business income but does not reduce earned income for CPP purposes (CPP uses a different definition). For RRSP purposes, the earned income figure is the same as the net income reported on the T1.
Rental income earned income treatment
Rental income from real property (residential or commercial buildings) qualifies as earned income for RRSP purposes only if the activity is rental of real property, not a business. If the rental activity is conducted as a business with services provided to tenants beyond basic rental (a bed and breakfast, hotel, or fully serviced rental), the income is treated as business income (which also qualifies). Rental income from personal property such as equipment or vehicles does not qualify as earned income.
Earned income for prior years
RRSP room is calculated using prior-year earned income. Earned income for 2025 determines the new RRSP room available January 1, 2026. A person who earned no income in 2025 (retired, on parental leave, sabbatical, unemployed) generates no new RRSP room for 2026, but any unused room from prior years carries forward indefinitely.
Earned income while non-resident
Income earned while non-resident does not generate RRSP contribution room. A Canadian who works abroad as a non-resident accumulates no new RRSP room from those earnings. Returning to Canadian residency restores the ability to use any unused carry-forward room from earlier resident years.
Frequently asked questions
- What counts as earned income for RRSP?
- Net employment, self-employment, rental from real property, royalties for own works, certain disability pensions, and taxable support payments received.
- Do dividends count as earned income?
- No. Dividends, interest, and capital gains are investment income and do not generate RRSP room.
- Does CPP count as earned income for RRSP?
- Only the disability portion. CPP retirement benefits do not count.
- Does rental income count?
- Yes, net rental income from real property qualifies. Rental income from personal property such as equipment does not.
- Do royalties count?
- Royalties for a work or invention you authored or invented qualify. Royalties from owning copyrights authored by others do not.
- Does self-employment income count?
- Yes. Net self-employment income from T2125, T2121, or T2042 qualifies for the 18% calculation.
- Does income earned outside Canada count?
- Yes if earned while a Canadian resident. Income earned while non-resident does not generate new RRSP room.