The Registered Retirement Savings Plan (RRSP) is Canada's most powerful tax-deferred savings vehicle. Contributions directly reduce your taxable income, investments grow tax-sheltered, and you pay tax only when you withdraw — ideally in retirement when your income and tax rate are lower.
RRSP contributions are claimed on line 20800 of your T1 return and reduce your net income, which in turn:
| Marginal Rate (Fed + Prov, Ontario) | $100 RRSP Saves | $20,000 RRSP Saves |
|---|---|---|
| ~20% (lowest bracket) | $2,000 | $4,000 |
| ~30% (mid bracket) | $3,000 | $6,000 |
| ~43% (high bracket) | $4,300 | $8,600 |
| ~53% (top, Ontario) | $5,300 | $10,600 |
Your available room is shown on your most recent Notice of Assessment (NOA) or in CRA My Account. It reflects 18% of prior year earned income (to the annual limit) minus any pension adjustment, plus unused room carried forward.
For the 2024 tax year: March 3, 2025. For the 2025 tax year: February 28, 2026. Contributions made in the first 60 days of the year can be applied to either the prior or current tax year.
CRA allows a lifetime over-contribution buffer of $2,000. Amounts beyond your room plus this buffer are subject to a 1% per month penalty tax. Always verify your room before contributing.
Contributing to a spousal RRSP allows the higher earner to claim the deduction while the lower-income spouse owns the account and will pay tax on withdrawals at a lower rate. Important: withdrawals from a spousal RRSP are attributed back to the contributor if made within 3 calendar years of a contribution.
| Feature | RRSP | TFSA |
|---|---|---|
| Contribution deductible? | Yes | No |
| Growth | Tax-deferred | Tax-free |
| Withdrawals taxable? | Yes | No |
| Room restored on withdrawal? | No | Yes (next year) |
| Best for | High income earners now | Flexibility, lower income |
It is not always optimal to claim your RRSP deduction in the year you contribute. If you expect higher income in a future year, contribute now (starting the tax-sheltered growth clock) but defer claiming the deduction until your marginal rate is higher and the deduction saves more tax.
Your RRSP must be converted or collapsed by December 31 of the year you turn 71. Most Canadians convert to a Registered Retirement Income Fund (RRIF), which requires minimum annual withdrawals. The minimum withdrawal percentage starts at about 5.28% at age 72 and increases with age.
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