See how much tax is withheld when you withdraw from your RRSP — and why the withheld amount is often not the tax you actually owe.
Withholding rates are set by the CRA and apply to the whole withdrawal amount, not in tiers.
This is the most important thing to understand about RRSP withdrawals. The amount your institution withholds is a prepayment, set at a flat rate by the CRA. Your actual tax is determined when you file, based on your total income for the year and your marginal rate.
Those two numbers often disagree. If you withdraw $20,000 on top of a $60,000 salary, the withholding is 30% ($6,000), but that $20,000 sits in your top bracket, which could be over 43% depending on your province. The gap arrives as a tax bill the following April.
| Amount withdrawn | Outside Quebec | Quebec |
|---|---|---|
| Up to $5,000 | 10% | 5% |
| $5,000.01 to $15,000 | 20% | 10% |
| Over $15,000 | 30% | 15% |
Quebec figures are the federal portion only — provincial tax is withheld on top by Revenu Québec. Non-residents of Canada face 25% withholding unless reduced by a tax treaty.
No. Withholding is applied to the entire withdrawal at a single rate. Withdrawing $15,000 costs 20% ($3,000), but withdrawing $15,001 costs 30% on the whole amount ($4,500.30) — nearly $1,500 more for one extra dollar. If you are near a threshold, withdrawing slightly less can leave you meaningfully better off in the short term.
Only if the withholding turns out to be more than your actual tax. Because RRSP withdrawals are taxed at your marginal rate and withholding is a flat, bracket-based rate, low-income years and small withdrawals can produce a refund, while large withdrawals on top of a decent salary usually produce a bill.
Yes. Unlike a TFSA, an RRSP withdrawal counts as taxable income. It raises your net income for the year, which can trigger the OAS recovery tax, reduce the Guaranteed Income Supplement, and affect income-tested benefits such as the Canada Child Benefit. A large one-off withdrawal can have knock-on effects well beyond the tax on the withdrawal itself.
In general, spend TFSA money first if you want to keep your taxable income low, because TFSA withdrawals do not affect benefit clawbacks. RRSP withdrawals are more attractive in a year when your other income is unusually low. The right answer depends on your bracket now versus your expected bracket later.