Canada RRSP Guide (Registered Retirement Savings Plan)

the Registered Retirement Savings Plan (RRSP) in Canada. The RRSP is the cornerstone of the Canadian retirement savings system. The RRSP contribution limit for the 2025 tax year is 18% of the prior year's earned income, up to the annual maximum of $31,560 (increased from $31,065 in 2024). The contributions to the RRSP are tax-deductible (the taxpayer deducts the contributions from the income on the tax return, reducing the taxable income). The unused contribution room carries forward indefinitely (the taxpayer can make up for the past years when the contributions were missed). The RRSP deadline for the 2025 tax year contributions is March 2, 2026 (the contributions made within the first 60 days of the year — Jan 1 to Mar 2 — can be deducted against the prior year's income). The spousal RRSP allows the higher-income spouse to contribute to the RRSP in the spouse's name (the contributor deducts the contribution; the spouse reports the withdrawal income). The Self-Directed RRSP allows the taxpayer to hold the investments (stocks, ETFs, GICs, bonds, mutual funds) inside the RRSP account. The RRIF conversion must occur by the end of the year the taxpayer turns 71 (the RRSP is converted to the RRIF and the minimum annual withdrawal is required). The withdrawals from the RRSP are taxed as the ordinary income at the taxpayer's marginal rate. The RRSP tax-free growth (the investments inside the RRSP grow tax-free until withdrawal).

Contribution Rules

18% rule: The annual RRSP deduction limit is 18% of the prior year's earned income. The "earned income" includes the employment income (T4), the net rental income, the net business income, the disability benefits from the CPP/QPP, the research grants, and the certain other income. The investment income (the capital gains, the dividends, the interest) is NOT included in the earned income.
Annual maximum: $31,560 for 2025 (2024: $31,065, 2023: $30,780). The maximum is indexed to the inflation annually. The contribution limit cannot exceed the annual maximum regardless of the 18% calculation.
Unused room: The unused RRSP contribution room carries forward indefinitely. The taxpayer can accumulate the unused room from the previous years and use it in the future (subject to the annual maximum). The CRA tracks the RRSP room on the taxpayer's Notice of Assessment and the CRA My Account.
Overcontribution: The taxpayer is allowed a lifetime overcontribution of $2,000 without the penalty. The excess over $2,000 incurs the penalty of 1% per month on the excess (the taxpayer must withdraw the excess to stop the penalty).
Contribution deadline: The RRSP deadline for the 2025 tax year is March 2, 2026 (the first 60 days of 2026). The contributions made between March 3, 2025, and March 2, 2026, can be deducted on the 2025 return. The contributions made on or before the deadline but after the tax year end should be reported on the tax return for the year the contribution is claimed.
Deduction limit vs contribution limit: The taxpayer can contribute up to the contribution limit (18% of the earned income up to $31,560 plus the unused room) even if the deduction is not taken in the current year. The taxpayer can choose to defer the RRSP deduction to a future year when the income is higher (the "undeducted contributions" are reported on Schedule 7).

Spousal RRSP

Who can contribute: The taxpayer can contribute to the RRSP in the spouse's or the common-law partner's name. The contribution counts toward the taxpayer's deduction limit (not the spouse's). The spouse must have the RRSP contribution room for the contribution to be accepted (the spouse's room is reduced).
Tax benefits: The higher-income spouse reduces the taxable income at the high marginal rate. The lower-income spouse withdraws the funds in retirement at a lower marginal rate. The spousal RRSP is the most effective when the spouses have the different income levels.
Attribution rules: If the spouse withdraws from the spousal RRSP within 3 calendar years of the contribution, the withdrawal is taxed back to the contributor (the "attribution rule"). The 3-year rule applies on a per-contribution basis. The withdrawals after 3 years are taxed in the spouse's hands.
Pension splitting: The RRIF income (not the RRSP income) can be split between the spouses at age 65+. The spousal RRSP allows the income splitting before age 65 through the withdrawal strategy (the spouse withdraws after the 3-year rule).

Home Buyers' Plan (HBP)

Maximum withdrawal: $60,000 per person (increased from $35,000 as of 2024). The taxpayer must be a first-time home buyer (the taxpayer must not have owned a home in the prior 4 years).
Repayment: The withdrawal must be repaid into the RRSP over 15 years (starting the 2nd year after the withdrawal). The annual repayment is 1/15th of the total withdrawal. The missed repayments are added to the income in the year of the missed payment.
Eligible property: The HBP can be used to buy a qualifying home (a single-family home, a condominium, a mobile home, a semi-detached home, or a townhouse) in Canada. The home must be occupied by the borrower (or the spouse) within 1 year of the purchase.
HBP vs FHSA: The FHSA (First Home Savings Account) offers the same $60,000 contribution limit (with the tax-deductible contributions and the tax-free withdrawals) without the repayment requirement. The FHSA is generally more advantageous for the first-time home buyers. The taxpayer can use both the HBP and the FHSA.

RRSP Withdrawal Rules

Taxation: The RRSP withdrawals (the "annuity payments" or the "lump-sum withdrawals") are fully taxed as the ordinary income at the marginal rate. The financial institution withholds the tax at source: 10% (or 5% in Quebec) on the withdrawals under $5,000, 20% (or 10% in Quebec) on $5,000 to $15,000, and 30% (or 15% in Quebec) on the amounts above $15,000. The withholding is a prepayment; the final tax is calculated on the tax return.
Tax-free withdrawals: The taxpayer can make the tax-free withdrawals from the RRSP for the HBP (up to $60,000) and the LLP (up to $20,000 for the education). The taxpayer can also withdraw the overcontributed amounts (the excess above $2,000) without the penalty if the withdrawal is made in the same year.
RRIF conversion: The RRSP must be converted to the RRIF (Registered Retirement Income Fund) by December 31 of the year the taxpayer turns 71. The RRIF does not accept the new contributions. The RRIF requires the minimum annual withdrawal (7.38% at age 71, increasing to 20% by age 94). The taxpayer can also take the annuity or the lump-sum option at age 71 instead of the RRIF.
RRSP maturity: At the death of the RRSP annuitant, the RRSP is transferred tax-free to the surviving spouse (the "spousal rollover"). If there is no spouse, the RRSP is taxed as the income of the deceased (the "deemed disposition") unless the beneficiary is the dependent child or the grandchild with the disability (the "qualified trust").

For the TFSA comparison and the contribution room, see our TFSA Guide →. For the FHSA and the first-time home buyer rules, see our FHSA Guide →.