RRSP Withdrawal Rules and the Tax You'll Actually Pay

The basic rule: withdrawals count as income

Every dollar you withdraw from an RRSP (with two exceptions covered below) is added to your income for that tax year, just like employment income or interest earnings. There's no special "capital gains" or preferential rate—it's taxed at your marginal rate, whatever that turns out to be once the withdrawal is stacked on top of your other income.

This is the trade-off you made when you contributed: you got a tax deduction going in, so the government collects tax coming out. If you withdraw a large amount in a single year, it can push you into a higher tax bracket for that year alone, even if your normal income is modest.

The financial institution holding your RRSP has to report the withdrawal to the CRA on a T4RSP slip, and you'll need that slip to file your return. There's no way to withdraw quietly—it's fully tracked.

Withholding tax: what gets held back at source

When you make a withdrawal (other than through the Home Buyers' Plan or Lifelong Learning Plan, below), your financial institution is required to withhold a percentage and remit it directly to the CRA as a prepayment against the tax you'll owe.

As of 2026, the commonly cited withholding rates for residents of Canada outside Quebec are roughly: 10% on withdrawals up to $5,000, 20% on withdrawals between $5,000 and $15,000, and 30% on withdrawals above $15,000. Quebec has its own combined federal-provincial rates that work out differently. Confirm the exact current rates and thresholds with the CRA before you withdraw, since these details can change.

• This withholding is not your final tax bill—it's a deposit. Your actual RRSP-related tax is settled when you file, based on your total income for the year.
• Non-residents of Canada face a different, generally flat withholding rate rather than the tiered structure.
• Splitting one large withdrawal into several smaller ones across different years, rather than one lump sum, can sometimes reduce withholding and keep you in a lower bracket—worth discussing with a tax professional if you're planning a big withdrawal.

The two exceptions: HBP and LLP

Two federal programs let you withdraw from your RRSP without immediate tax or withholding, as long as you follow the repayment rules.

The Home Buyers' Plan (HBP) lets a first-time home buyer withdraw from their RRSP toward a down payment. The withdrawal limit was increased in recent years—confirm the current maximum with the CRA before relying on a specific figure. You then have to repay the amount back into your RRSP over a set number of years; any portion you don't repay on schedule gets added to your income as taxable in that year.

The Lifelong Learning Plan (LLP) works similarly but for funding full-time education or training for you or your spouse, with its own withdrawal limits and a longer repayment window. Same rule applies: skip a required repayment, and that amount becomes taxable income.

Both programs are essentially interest-free loans to yourself from your own RRSP—powerful if you can stick to the repayment schedule, but they permanently reduce your RRSP balance's growth in the meantime if you're slow to pay it back.

What happens at age 71 and beyond

You can't keep an RRSP open indefinitely. By December 31 of the year you turn 71, you must convert it to a Registered Retirement Income Fund (RRIF), purchase an annuity, or cash it out entirely (which would trigger a large, immediate tax bill on the whole balance—rarely a good idea).

Once converted to a RRIF, you're required to withdraw a minimum amount each year, calculated as a percentage of the account's value based on your age. That minimum is taxed the same way as any RRSP withdrawal: added to your income for the year. Unlike RRSP withdrawals, RRIF minimum withdrawals aren't subject to withholding tax, though amounts above the minimum still are.

Because RRIF withdrawals are mandatory once you start, this is where a lot of retirement tax planning happens—deciding when to start drawing down an RRSP relative to CPP, OAS, and other income sources to manage your overall bracket.

Other consequences worth knowing

Unlike a TFSA, RRSP contribution room does not come back after a withdrawal. If you take out $10,000, that $10,000 of room is gone for good—you can't recontribute it later without it counting against your current year's new limit.

Because RRSP and RRIF withdrawals count as income, large withdrawals can affect income-tested benefits like Old Age Security, which is subject to a clawback above a certain income threshold, and the Guaranteed Income Supplement. This is a real consideration for retirees deciding how much to draw down each year.

If you're withdrawing due to financial hardship, note that RRSP withdrawals are one of the few flexible options you have, but the tax hit means you often net significantly less than the amount you see on your account statement. Running the numbers before you withdraw—rather than after—avoids an unpleasant surprise at tax time.

Frequently asked