What is the contribution limit for RRSP for the year?

The contribution limit for a Registered Retirement Savings Plan (RRSP) is indeed calculated based on a percentage of the individual's previous year's income. Specifically, it is set at 18% of the earned income reported on the individual's tax return for the previous year, up to a maximum dollar limit established by the government. This approach ensures that the contribution limits are aligned with the individual’s capacity to save based on their income level.

This mechanism encourages retirement savings while also considering the varying income levels of taxpayers. The limit is adjusted annually to account for inflation and any changes in income levels, meaning that it can vary year to year.

In contrast, the other options suggest limits or criteria that do not accurately reflect how RRSP contribution limits are determined. There is, in fact, a maximum contribution limit in place (unlike what option B suggests), and the fixed amount mentioned in option C does not consider the variability based on income. Similarly, option D incorrectly states that the limit is based on the average income over three years, whereas it is strictly based on the previous year's income. Thus, the rationale behind the correct answer aligns with the structured savings approach intended by the RRSP system in Canada.