RRSP Withdrawal Tax Calculator

When you withdraw funds from your RRSP, your financial institution is required to withhold tax at source. For Canadian residents outside Quebec, the federal withholding rates are: 10% on amounts up to $5,000, 20% on amounts between $5,001 and $15,000, and 30% on amounts over $15,000. Quebec residents have different rates because Quebec collects its own provincial tax at source. The withholding tax is a prepayment of your income tax, not the final tax amount.

No. The withholding tax is only a prepayment. When you file your annual income tax return, the RRSP withdrawal is added to your total income for the year and taxed at your marginal rate. If the withholding tax was less than your actual tax liability on the withdrawal, you will owe additional tax. If it was more, you will receive a refund. The actual tax depends on your total income, province of residence, and available tax credits.

There are two programs that allow tax-free RRSP withdrawals: the Home Buyers’ Plan (HBP) lets first-time home buyers withdraw up to $60,000 (as of 2024) to buy or build a qualifying home, and the Lifelong Learning Plan (LLP) allows withdrawals of up to $10,000 per year (maximum $20,000 total) to finance full-time education. Both require repayment within specified timeframes. Outside these programs, all RRSP withdrawals are subject to withholding tax and must be reported as income.

Your province of residence affects the total tax on RRSP withdrawals because each province has its own income tax rates. While the federal withholding rates are the same across Canada (outside Quebec), the actual tax you owe at filing time depends on your provincial tax bracket. Provinces like Alberta and Ontario have lower top rates, while Nova Scotia and Newfoundland have higher rates. The withholding tax may not fully cover your combined federal and provincial tax liability.

Making multiple smaller withdrawals to stay within the 10% withholding bracket (under $5,000 each) means less tax is withheld at source. However, this does not reduce your actual tax liability. The CRA adds all RRSP withdrawals together as income on your tax return, and you are taxed on the total at your marginal rate regardless of how many separate withdrawals you made. You could end up owing a larger tax bill at filing time if insufficient tax was withheld.