Many of us already know about the benefits of using your RRSP to invest in private mortgages. But before you can use all that money you’ve socked away – you need to sock it away first. But all of us already know that there’s only so much you can contribute to your RRSP before some of that money starts being taxed by the government. So the question is: how much can you stash away in there before tax time? The deadline is only a few months away, and for those who want to use that RRSP to invest in private mortgages, they’ll need to start saving now so that they can. So, what’s the maximum contribution investors can make? And how much should you set aside in other investments that you may want to, sometime in the future, put towards private mortgage investments?
The general rule of thumb is that you can contribute up to 18 per cent of your annual income to your RRSP. However, some investors may be able to contribute more than this. This is because if you haven’t invested the full amount into your RRSP that you were eligible to in the years past, that amount could be carried forward into this year or future years. If you want to know exactly how much you have available to put into your RRSP, to invest in private mortgages or otherwise, take a look at your Notice of Assessment that the Canada Revenue Agency sent you last year. This will have the full amount available clearly indicated, and will give you an idea as to how much you can invest into your RRSP, and subsequently, into a private mortgage you intend to fund.
There’s also one small caveat that you need to be aware of if you intend to invest the full 18 per cent of your income towards an RRSP – there’s a maximum the CRA places on that contribution every year. For the 2013 year, that maximum will be $23,820. And while that may be enough to invest in a second private mortgage, it might not be enough for the first mortgage; so you may want to think about having another investment on hand that you can tap into if you want to invest in private mortgages, or just have more income at the ready to make up the balance of the mortgage amount.