RRSP Withdrawal Tax

RRSP Withdrawal Tax in Canada: What Is Withheld and What You Really Owe

When you take money out of an RRSP, the institution withholds 10% of a withdrawal up to $5,000, 20% from $5,000 up to $15,000 and 30% above $15,000 (5%, 10% and 15% in Quebec, plus Quebec's own provincial tax). That is a prepayment, not your tax. The actual cost is whatever the withdrawal adds to your income tax for the year, which can be nothing at a low income and more than 40% at a high one. For an Ontario resident earning $45,000, a $10,000 withdrawal adds $2,354 of tax against $2,000 withheld. For someone with no other income, the same withdrawal adds $0 against $2,000 withheld. This guide works the gap between those two numbers across income levels, shows where the tax on the next dollar jumps, and covers the rules that decide whether a withdrawal also costs you contribution room or other benefits. Splitting a withdrawal changes when cash arrives and not what is owed, and the tables below show where the withheld amount is too high, about right or too low.

What the CRA actually specifies

The CRA publishes one table for withholding tax on RRSP withdrawals by residents, keyed to the size of the withdrawal.

In Quebec, provincial tax is also withheld on funds held there, and your financial institution or Revenu Québec can confirm those amounts. The CRA puts it this way: "The tax that was withheld may not always be enough to account for the tax you owe at your tax bracket." You may therefore owe more when you include the withdrawal on your return. It can also exceed the tax you owe, which is the case people forget.

The withdrawal is reported as income on line 12900 of the return for the year it was taken out, and the tax already withheld, shown in box 30 of the T4RSP slip, is claimed on line 43700. The T4RSP therefore does two jobs: it adds income and it records a payment you have already made. The return reconciles them, which is why the final result is a refund or a balance owing and not a fixed percentage.

The cash cliffs inside the withholding table

Because each rate applies to the whole withdrawal, not just the slice above the line, the cash you receive drops when you cross $5,000 or $15,000.

Withdrawing one extra dollar at $15,000 costs about $1,500 of cash on the day, and withdrawing a dollar more than $5,000 costs about $500. These are timing effects. The extra amount comes back as a larger refund (or a smaller balance owing) when you file, provided your real tax is lower than the amount withheld. That "provided" is the next section.

Four withdrawal sizes at six incomes, withheld against owed

The tables that follow use a model of an Ontario resident for 2026 with only the basic personal amounts. Income is employment income (with CPP and EI) except in the first row, which is an RRSP withdrawal with no other income at all. Tax is federal and Ontario, including the Ontario surtax, Health Premium, the Ontario tax reduction and the low-income individuals and families (LIFT) credit for employment income, built from the CRA's T4127 rates and Ontario's published LIFT rules. LIFT is the lesser of $875 or 5.05% of employment income, reduced by 5% of individual net income over $32,500, so a withdrawal that lifts a $25,000 or $45,000 earner above $32,500 also claws part of it back. The model is of a single person, so LIFT's family-income test does not apply. For each case, "tax added" is the tax on the return with the withdrawal minus the tax without it.

Three things stand out. First, small withdrawals are the ones most likely to be under-withheld for anyone with an income, because 10% is below every real marginal rate once you earn more than the basic amounts. A $4,000 withdrawal at $45,000 of income owes $708 more than was withheld. Second, the 20% and 30% tiers over-withhold at lower incomes and under-withhold at higher ones, so the same $20,000 withdrawal produces a $5,395 refund at no other income and a $2,976 balance owing at $150,000. Third, the crossover sits near $70,000 for a $20,000 withdrawal, which is why $70,000 of income is the one row where the withheld amount is almost exactly right.

The no-income case: why the first dollars cost nothing

At no other income, a withdrawal below about $16,452 produces no tax at all in the model, and $20,000 adds only $605. The reasons are layered, and each has its own source in the CRA's formulas.

• The federal basic personal amount is $16,452 for incomes up to $181,440, which at the 14% lowest rate cancels the first $16,452 of tax.
• Ontario's basic personal amount is $12,989 at 5.05%. Ontario also has a tax reduction that wipes out small amounts of basic provincial tax: the reduction is the lesser of the tax and $600 minus the tax. On a $20,000 withdrawal, basic Ontario tax is $354.10, the reduction is $245.90 and Ontario tax after it is $108.20.
• The Ontario Health Premium starts only above $20,000 of taxable income.

Here is how the tax behaves as the withdrawal grows when there is no other income.

A person with a low-income year, a gap between jobs, a first year of retirement or a year off for parental leave, can pull out RRSP money at an average rate far below what that same money would cost in a high-income year. That is the logic behind RRSP "meltdown" strategies for retirees, and it is why the right comparison for a withdrawal is the rate you will pay in the year you take it against the rate you got when you contributed. The calculator on the RRSP meltdown optimizer page runs that comparison over years.

The tax on the next dollar, at every level

A withdrawal is stacked on top of your other income, so its first dollars are taxed at the bottom of whichever bracket you are already in, and its last dollars at the top. The table shows the combined federal and Ontario tax on the next $1,000 of income at each level of taxable income, from the same model. It includes the Ontario surtax and Health Premium and the phase-down of the federal basic personal amount.

Some of these rows hide small steps. The Ontario surtax begins when basic Ontario tax passes $5,818, which for someone with only the basic amounts happens at about $94,900 of taxable income, and a second layer starts when it passes $7,446, at about $111,800. Between $181,440 and $258,482 the federal basic personal amount shrinks by $1,623 across $77,042 of income, which adds about 0.29 points to the federal rate there (29.29% instead of 29%). The Ontario Health Premium also rises by 25 cents on each dollar over short stretches of income, for example between $72,000 and $72,600 and again between $200,000 and $200,600, so a withdrawal that straddles one of those lines costs a little more than the table suggests.

The practical use is to choose a size. A withdrawal that fills the space between your income and the top of a bracket is taxed at a flat marginal rate, while one that crosses a bracket edge is taxed at both. For a person at $50,000 of other income, the first $3,891 of withdrawal falls at 19.05%, the next $4,632 up to $58,523 of federal bracket at 23.15%, and beyond that at 29.65%.

The round trip: contribute at one rate, withdraw at another

An RRSP only wins if the tax saved on the way in beats the tax paid on the way out. Take a $10,000 contribution and a $10,000 withdrawal years later, using the same model. The "saved" column is the reduction in that year's tax from deducting $10,000 against employment income. The "paid" column is the extra tax from adding $10,000 on top of other income, such as a pension, with only the basic amounts.

The first row is the one that surprises people: a worker in the low-income tax bracket who later has a larger retirement income loses money on the round trip, before any growth. The deduction was worth 25.6 cents on the dollar, and the withdrawal cost 29.7 cents. The last row is the opposite extreme, a high earner who can later take the money out at no other income and pays nothing. Part of the first row's deduction value is the LIFT credit growing back as income falls. Tax-free growth inside the account adds to all of these rows, and so does any benefit clawed back on the way out, but the table shows why the usual advice is to compare the two marginal rates and not just to assume a lower rate in retirement. Older taxpayers also have credits this model leaves out, such as the age and pension income amounts, which shrink the cost of the withdrawal in retirement.

Spreading a large withdrawal across two years

Because the rate rises with income, taking a large amount in one calendar year costs more than taking half in each of two years when other income is stable. The table shows an Ontario employee with the stated employment income who needs the money over a December and a January.

The $70,000 row saves little because most of both versions sits in the 29.65% bracket. Only the top stretch of the single-year version crosses the Ontario surtax line near $94,900 of taxable income. The larger savings in the other rows come from bracket edges and from the surtax and Health Premium, and splitting can also reduce the CCB and other income tests described above. It is worth checking before a large withdrawal is taken in December, since moving it two weeks later changes the tax year it falls in.

Splitting a withdrawal does not change the tax

A common question is whether withdrawing $20,000 as four withdrawals of $5,000 changes anything. The CRA's table is written by the size of the withdrawal, and whether your institution treats several withdrawals as separate is a question for them. What does not change is the return. The tax on the return depends on the total withdrawn in the calendar year, not on how many transactions made it up, so splitting can move cash around within the year while the balance owing or refund at filing time adjusts to compensate. A person who splits to keep the withholding at 10% but earns $100,000 will owe the difference in April.

The reverse also holds. The institution does not know your other income, so it cannot know when 30% is too much. If you expect a refund because your income is low, the withholding is a short-term loan to the government, and the sizeable refund in the first table (up to $7,834 on a $50,000 withdrawal at no other income) arrives only after you file.

Spousal RRSPs and the three-year rule

Money taken from a spousal or common-law partner's RRSP can be taxed to the contributor and not to the annuitant. The CRA's T4040 says that if you contributed to your spouse's or common-law partner's RRSP in the year or either of the two preceding years, and they withdrew amounts, you may have to include all or part of the withdrawal in your own income. It is a tracing rule, so a withdrawal from a spousal plan inside that window is not a way to shift income to the lower earner. Outside the window the annuitant is taxed in the usual way.

What a withdrawal does to other income-tested amounts

Because a withdrawal is taxable income, it raises the net income that other programs read. The Canada Child Benefit is the clearest example. A couple with two children and $70,000 of family income that withdraws $10,000 pushes its income to $80,000, and the CCB falls by 13.5% of $10,000, which is $1,350. The tax on the withdrawal and that $1,350 add together, so the effective cost is well above the line for tax in the table above. The mechanics are in the Canada Child Benefit guide. For older Canadians, a larger income can bring an OAS recovery tax; the thresholds are in the OAS clawback guide. The general rule is that the tax table understates the cost of a withdrawal for anyone whose benefits are tested on net income, and the other Canadian tax and benefits guides work the tests one at a time.

Withdrawn room is not given back

The CRA's chart for working out RRSP deduction room builds it from the new room for the year plus unused room carried forward, and it contains no line that adds a withdrawal back. T4040 also says directly that moving property from an RRSP to an FHSA does not restore unused RRSP deduction room. In practice, a $20,000 withdrawal is $20,000 of room you do not recover. That is the main difference from a TFSA, where withdrawals are added back to room the following year, and it is the reason to prefer the smallest withdrawal that does the job. The choice between filling an RRSP and a TFSA in the first place is in the RRSP vs TFSA guide.

Two exceptions exist for withdrawals under the Home Buyers' Plan and the Lifelong Learning Plan, where the amount withdrawn is not income if it is repaid on schedule. The T4040 explains that contributions made to the RRSP in the 89 days before an HBP or LLP withdrawal may not be deductible, which catches people who top up the account just before withdrawing. It also shows that, under the temporary relief, a person who makes a first HBP withdrawal in 2025 begins repaying in 2030, with the 15-year repayment period starting the fifth year after the first withdrawal. Withdrawals made for these plans are a separate category from the ordinary withdrawals this guide has been pricing.

Withdrawals at 71 and after

Ordinary withdrawals are optional. When the RRSP has to be converted to a RRIF, withdrawals become mandatory, and the minimums are covered in the RRIF minimum withdrawals guide. The same stacking logic applies, so the smoothest approach is usually to withdraw something each year in the low-tax years before the minimums begin, instead of a lump sum in one high-tax year later.

A worked decision

Suppose a 62-year-old in Ontario has stopped work, has no other income this year and wants to spend $20,000. There are two ways to do it.

1. Withdraw $20,000 once. The amount is above $15,000, so the institution withholds 30%, which is $6,000, and pays out $14,000. On filing, the tax is $605, so the refund is $5,395. Cash in hand on the day is $14,000, and the refund comes months later.
2. Withdraw $20,000 as four withdrawals of $5,000 each, if the institution applies the table to each one. The withholding is $2,000, cash in hand is $18,000, and the tax at filing is the same $605, which leaves a refund of $1,395.

The tax is $605 either way. The only difference is the timing of the cash. If the person instead waits and withdraws the same $20,000 in a year with $70,000 of other income, the added tax is $6,080 instead of $605, an extra $5,475 for no change in the amount received. Anyone approaching 71 with a large balance will find how the mandatory minimums work in the RRIF minimum withdrawals guide.

Sources

• CRA, "Tax rates on withdrawals" (withholding rates by withdrawal size for residents, Quebec rates, non-final tax): https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/making-withdrawals/tax-rates-on-withdrawals.html (checked October 23, 2026)
• CRA, "Withdrawing from your RRSPs" (line 12900, T4RSP box 30 and line 43700): https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/making-withdrawals/withdrawing-your-rrsps.html (checked October 23, 2026)
• CRA, Guide T4040, RRSPs and Other Registered Plans for Retirement (spousal withdrawals, deduction room chart, FHSA transfer, HBP and LLP rules and repayment relief, 89-day rule): https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4040/rrsps-other-registered-plans-retirement.html (checked October 23, 2026)
• CRA, T4127 Payroll Deductions Formulas, 122nd Edition (federal and Ontario rates, basic personal amounts, federal BPA phase-down, Ontario surtax, tax reduction and Health Premium used in the tax model): https://www.canada.ca/en/revenue-agency/services/forms-publications/payroll/t4127-payroll-deductions-formulas/t4127-jan/t4127-jan-payroll-deductions-formulas-computer-programs.html (checked October 23, 2026)
• CRA, Canada child benefit, how we calculate your CCB (used for the $1,350 example): https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-we-calculate-your-ccb.html (checked October 23, 2026)
• Tables are hand calculations on those pages and on Ontario's published LIFT rules (https://www.ontario.ca/page/low-income-individuals-and-families-tax-credit, checked October 23, 2026), for an Ontario resident with basic amounts; the model is of a single person, so the LIFT family-income test does not apply.