When you take money out of an RRSP before it’s converted to retirement income, your financial institution withholds 10%, 20%, or 30% in RRSP withholding tax, depending on how much you withdraw. That amount is sent to the Canada Revenue Agency as a prepayment against the income tax you’ll owe when you file, not a separate penalty. Because your original contributions reduced your taxable income, the CRA collects tax on the way out.
The Three Withholding Rate Tiers
For residents outside Quebec, the CRA sets three tiers based on the size of each individual withdrawal:
- Up to $5,000: 10% withheld
- $5,001 to $15,000: 20% withheld
- Over $15,000: 30% withheld
These rates apply per transaction, not to the combined total you take out over a year.1Canada Revenue Agency. Tax Rates on Withdrawals Three separate $5,000 withdrawals each attract 10% withholding, so $500 is held back on each and $1,500 in total. A single $15,000 withdrawal instead attracts 20% withholding, or $3,000 held back at source. The final tax bill on your return is the same either way, but the immediate cash in your hand differs.
Quebec Residents
If your RRSP is held in Quebec, the federal rate at each tier is cut roughly in half, and the province withholds its own tax on top:
- Up to $5,000: 5% federal
- $5,001 to $15,000: 10% federal
- Over $15,000: 15% federal
Quebec adds provincial withholding on the same withdrawal.1Canada Revenue Agency. Tax Rates on Withdrawals For the exact combined figure, check with your financial institution or Revenu Québec.
How the Withholding Actually Happens
Section 153 of the Income Tax Act requires whoever pays out of an RRSP to deduct the prescribed amount before releasing funds.2Justice Laws Website. Income Tax Act – Section 153 Your bank or brokerage handles it automatically. Request a $10,000 withdrawal and you’ll receive $8,000, with $2,000 sent to the CRA on your behalf. The gross amount you ask for is not the amount that lands in your account.
After the withdrawal, the institution issues a T4RSP slip showing both the gross amount and the tax withheld. You report the income on line 12900 of your return and claim the tax already paid as a credit on line 43700.3Canada Revenue Agency. Withdrawing From Your Own RRSPs
Why You May Still Owe More at Tax Time
Withholding is an estimate, not a settlement. When you file, the withdrawal is added to your other income for the year and taxed at your marginal rate. The amount already withheld is credited against the total.
If your combined income puts you in a bracket above the withholding rate, you’ll owe more. Someone earning $90,000 in salary who withdraws $20,000 from an RRSP has 30% ($6,000) held back, but the $20,000 is taxed at their full marginal rate, which in most provinces sits above 30%. The gap shows up as a balance owing.1Canada Revenue Agency. Tax Rates on Withdrawals
The reverse can also happen. If you had little other income that year, your actual rate may be lower than what was withheld, and the difference comes back as a refund.
Withdrawals That Skip Withholding
A handful of programs let you access RRSP money without withholding, provided you meet the rules and repay on schedule.
Home Buyers’ Plan
The Home Buyers’ Plan lets you withdraw up to $60,000 to buy or build a qualifying home, with no tax withheld at the time of withdrawal.4Canada Revenue Agency. The Home Buyers’ Plan You generally need to qualify as a first-time homebuyer, with exceptions for individuals with disabilities. Repayment runs over 15 years. For withdrawals before January 1, 2022, repayment starts in the second year after your first withdrawal; for withdrawals between January 1, 2022, and December 31, 2025, a temporary relief provision pushes the start to the fifth year.5Canada Revenue Agency. How to Repay the Amounts Withdrawn From Your RRSPs Under the Home Buyers’ Plan Each year, you owe at least one-fifteenth of the total. Miss a payment and the shortfall is added to your income on line 12900 and taxed at your marginal rate, while the remaining balance carries forward.
Lifelong Learning Plan
The Lifelong Learning Plan permits withdrawals of up to $10,000 per calendar year, capped at $20,000 in total, to fund training or post-secondary education for you or your spouse. No tax is withheld.6Canada Revenue Agency. Lifelong Learning Plan Repayment runs over 10 years, and unpaid amounts become taxable income the year they’re missed.
Direct Transfer to an FHSA
You can move funds from an RRSP to a First Home Savings Account without withholding, but only through a direct transfer between institutions using Form RC720. The transfer can’t exceed your unused FHSA participation room, and it doesn’t create a new deduction or restore RRSP room.7Canada Revenue Agency. Transfers Into Your FHSAs The FHSA has an $8,000 annual room and a $40,000 lifetime cap.8Canada Revenue Agency. Participating in Your FHSAs If you instead pull the money out yourself and then contribute to your FHSA, the withdrawal is treated as a regular RRSP withdrawal with full withholding and taxable income.
Spousal RRSPs and the Three-Year Rule
Withholding rates on a spousal RRSP work the same as any other RRSP, but the CRA’s attribution rule can change who reports the income. If the contributing spouse put money into the annuitant’s spousal RRSP in the year of withdrawal or in either of the two preceding years, some or all of the withdrawal is taxed in the contributor’s hands rather than the annuitant’s.9Canada Revenue Agency. Withdrawing From Spousal or Common-Law Partner RRSPs For income-splitting to work, you need at least two full calendar years with no contributions before the lower-income spouse withdraws.
RRIF Minimums Are Not Subject to Withholding
By the end of the year you turn 71, you must convert your RRSP to a Registered Retirement Income Fund, buy an annuity, or withdraw the full balance.10Canada Revenue Agency. Options for Your Own RRSPs Once in a RRIF, no tax is withheld on the minimum required annual withdrawal. Only amounts above the minimum are subject to withholding, using the same 10%/20%/30% tiers.11Canada Revenue Agency. Frequently Asked Questions (RRSPs/RRIFs) The minimum is still fully taxable on your return; it just isn’t taxed at source.
Non-Residents Pay a Flat 25%
Once you’re no longer a Canadian tax resident, the tiered system stops applying. Under Part XIII of the Income Tax Act, RRSP withdrawals by non-residents face a flat 25% withholding rate regardless of the amount.12Canada Revenue Agency. Non-Residents of Canada If Canada has a tax treaty with your country of residence, the rate may drop, often to 15% or lower, but you have to provide the required documentation to your institution to claim the reduced rate.13Canada Revenue Agency. Rates for Part XIII Tax The Part XIII tax is generally final; you don’t file a Canadian return to reconcile it.
Asking for a Different Amount
The standard rates aren’t the only option. If the normal withholding would create undue hardship, the Minister of National Revenue can authorize a reduced amount.2Justice Laws Website. Income Tax Act – Section 153 It isn’t common, but the provision exists for genuine financial difficulty.
You can also go the other way and elect to have more tax withheld. If you know the standard rate won’t cover your actual marginal tax on the withdrawal, asking your institution to withhold extra avoids a large balance owing at filing time.2Justice Laws Website. Income Tax Act – Section 153