A registered retirement savings plan (RRSP) lowers your tax now: contributions are deductible, and income earned inside the plan is usually not taxed while it stays there. You pay tax when you take money out, usually in retirement when your income is lower.
Your deduction limit
Each year’s new room is 18% of the previous year’s earned income, up to a dollar limit ($32,490 for 2025, $33,810 for 2026 and $35,390 for 2027), minus any pension adjustment from a workplace plan. Unused room carries forward. Your notice of assessment shows the exact figure. Source: CRA limits.
Going over the limit
If you are 18 or older, you can be up to $2,000 over your limit without penalty. Above that, the excess is taxed at 1% a month. Source: CRA.
Taking money out
A withdrawal is added to your income for the year, and the financial institution withholds tax up front: 10% on $5,000 or less, 20% on more than $5,000 up to $15,000, and 30% above $15,000. In Quebec the federal rates are 5%, 10% and 15%, plus Quebec tax. The tax you finally owe depends on your total income. Source: CRA withholding rates.
Using it to buy a home
The Home Buyers’ Plan lets first-time buyers borrow up to $60,000 from their RRSPs and repay it over 15 years. See the first-time buyer programs guide.
Estimate the tax saving
The RRSP calculator works out your limit and the income tax a contribution could save in your province this year.
Official source
CRA · Registered retirement savings plan (RRSP)
This guide explains general rules. Confirm your figures with your lender, lawyer, or the official source before you act.