RRSP Withdrawals and Tax
How RRSP withdrawals are taxed: 10%, 20% and 30% withholding vs the real tax, lost room, HBP and LLP, spousal RRSPs and early-retirement drawdowns.
The short version
- Every dollar you take out of an RRSP is taxable income in the year you take it, at your marginal rate. The tax withheld at the bank is only a deposit.
- Withholding outside Quebec: 10% on up to $5,000, 20% on $5,000.01 to $15,000, 30% over $15,000, per withdrawal.
- The contribution room you used is gone for good. Taking $20,000 out doesn't give you $20,000 of room back.
- Two exceptions are tax-free if you repay: the Home Buyers' Plan (up to $60,000) and the Lifelong Learning Plan.
- Withdrawing from a spousal RRSP within three calendar years of your spouse's last contribution taxes the money to your spouse, not you.
RRSP Withdrawals and Tax
An RRSP is a tax deferral, not a tax exemption. The government lent you the tax when you contributed, and a withdrawal is when it asks for the loan back. The bank takes a deposit on the spot, then your tax return settles the real bill. People who don't know this pay twice in their heads: once at the bank, and once in April, when the deposit turns out to be too small.
Withholding vs the Real Tax
| Withdrawal | Withheld at the bank | Real tax (Ontario, other income $50,000) | At filing |
|---|---|---|---|
| $4,000 | $400 (10%) | about $760 | Owe about $360 |
| $20,000 | $6,000 (30%) | about $5,170 | Refund of about $830 |
| $20,000, no other income | $6,000 (30%) | about $600 | Refund of about $5,400 |
From our 2026 rules engine, rounded. Splitting a big withdrawal into several small ones lowers the withholding, not the tax; the April bill just gets bigger. Run your own numbers in the income tax calculator, and see where you sit on marginal tax rates.
Thinking of cashing out part of your RRSP?
Tell the assistant how much, your other income this year and next, your age and province. It shows the tax, what gets withheld, and whether waiting, spreading it out or using the HBP would cost less.
When a Withdrawal Is Tax-Free
- Home Buyers' Plan: first-time buyers can take up to $60,000, repaid over 15 years. Repayments normally start in the second year after the withdrawal; for first withdrawals from 2022 to 2025 it's the fifth year, and the April 2026 Spring Economic Update proposed extending that to first withdrawals up to the end of 2028. Missed repayments become income. See Home Buyers' Plan and compare the FHSA.
- Lifelong Learning Plan: up to $10,000 a year and $20,000 in total for full-time education, repaid over 10 years.
- Transfers: moving money to a RRIF, another RRSP, or to a spouse's plan on separation is not a withdrawal.
Things That Cost People Money
- Withdrawing in a high-income year. A bonus year plus an RRSP withdrawal can mean 40% or more on the withdrawal. A sabbatical, a layoff year or early retirement before CPP and OAS start can mean 20%.
- Forgetting the room is gone. Unlike a TFSA, RRSP room doesn't come back. For short-term needs a TFSA is usually the better tool.
- Spousal RRSP timing. Your spouse contributed in December? A withdrawal before January three years later is taxed to them. Plan the contribution and the withdrawal together.
- Benefits and credits. A withdrawal raises net income, which can cut the child benefit, the Groceries and Essentials Benefit, and at 65+ the age amount and OAS; see OAS clawback.
- Not converting by 71. By December 31 of the year you turn 71, the RRSP must become a RRIF or annuity, or the whole thing is taxed as income. See converting an RRSP to a RRIF.
The Early-Retirement Meltdown
Retiring at 60 with a big RRSP and no pension? The years before CPP, OAS and RRIF minimums start are often your lowest-income years. Drawing the RRSP down then, at 20% to 30%, can beat leaving it to be forced out later at 30% to 45%, with the OAS clawback on top. It's arithmetic, not a rule; the retirement income tax calculator lets you compare years. Contributions and room are on RRSP and the RRSP contribution limit.
RRSP Withdrawal Questions
How much tax do I pay when I withdraw from my RRSP?
The withdrawal is added to your income and taxed at your marginal rate. The bank withholds 10%, 20% or 30% depending on the amount (outside Quebec), and your tax return works out the real tax.
What are the RRSP withdrawal withholding tax rates?
Outside Quebec: 10% on amounts up to $5,000, 20% on $5,000.01 to $15,000, and 30% on amounts over $15,000.
Do I get my RRSP contribution room back after a withdrawal?
No. Room used for a contribution is gone once the money is withdrawn, except for Home Buyers’ Plan and Lifelong Learning Plan withdrawals that are repaid.
Can I withdraw from my RRSP tax-free?
Only through the Home Buyers’ Plan (up to $60,000 for a first home) or the Lifelong Learning Plan, both of which must be repaid. Other withdrawals are taxable.
Who pays tax on a spousal RRSP withdrawal?
The spouse who owns the plan, unless the contributing spouse made a contribution to any spousal plan in the year of withdrawal or the two previous calendar years. In that case the withdrawal is taxed to the contributor.
Sources: CRA, Guide T4040, RRSPs and other registered plans for retirement; What is the Home Buyers' Plan. Checked October 2026. Quebec withholding rates differ and Quebec is not covered. Examples include basic credits only and are rounded.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.