Tax glossary

RRSP

Short answer

An RRSP is a registered account whose contributions are deductible from income and whose growth is untaxed until withdrawal, when the full amount is taxed as income.

Last reviewed: August 20, 2026

Key facts

Category	Registered accounts
Also known as	Registered Retirement Savings Plan
Reported on	T1 Schedule 7; deduction claimed on the T1
Where to find your limit	Latest notice of assessment, or CRA My Account
Practical deadline	60 days after the calendar year end
Tax on withdrawal	Fully taxable as income; withholding applies at source
Authority	Canada Revenue Agency

What it means in practice

Contribution room accrues as a percentage of earned income up to an annual maximum, plus any unused room carried forward. Your current limit appears on your latest notice of assessment. Contributions made in the first 60 days of a year can be deducted against either that year or the previous one, which is why the practical deadline falls at the start of March rather than December 31. An RRSP is most effective when your marginal rate at contribution is higher than at withdrawal. Withdrawals are fully taxable and, apart from the Home Buyers' Plan and Lifelong Learning Plan, the room is gone permanently.

Contributing and deducting are two separate decisions

Putting money into an RRSP creates the contribution; claiming it against income is a second, optional step. You may contribute this year and carry the deduction forward to a later year when your marginal rate is higher. This matters most for people whose income is rising — a new professional, or an owner-manager in the first profitable years of a corporation. Contributing early starts the tax-sheltered growth immediately; deferring the deduction saves the tax at the higher rate later. Over-contributing is the mirror risk. Room is cumulative and shown on your notice of assessment, but that figure predates any contribution you made after it was issued, which is the most common source of an over-contribution penalty.

Withdrawals before retirement

A withdrawal is added to income in the year you take it and the institution withholds tax at source, at a rate that rises with the amount. That withholding is a down payment, not the final tax — if the withdrawal pushes you into a higher bracket you owe the difference at filing. The contribution room is not restored. The two exceptions are the Home Buyers' Plan and the Lifelong Learning Plan, which are structured as repayable loans from the plan: you repay on a schedule, and a missed repayment is added to income for that year.

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FAQ

Should I contribute to an RRSP or a TFSA first?

Compare your marginal rate now against the rate you expect at withdrawal. If it is higher now, the RRSP deduction is worth more than tax-free growth. If it is lower now — early career, a low-income year, or a year with business losses — the TFSA generally wins, and RRSP room keeps accruing for later.

Do RRSP withdrawals affect income-tested benefits?

Yes. Because a withdrawal is ordinary income it raises net income, which is the basis for the Canada Child Benefit, the GST/HST credit, Old Age Security recovery tax and provincial credits. TFSA withdrawals do not, which is often the deciding factor for retirees.

What happens to an RRSP when I leave Canada?

An RRSP is generally not subject to departure tax and may be kept after emigration, but withdrawals by a non-resident attract Canadian withholding tax and the treatment depends on the tax treaty with your new country of residence. Take advice before you withdraw.

Sources

Need this applied to your situation?

A definition only gets you so far. Talk to a Montréal CPA about what this means for your return — in English or French.

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