RRSP withdrawal tax in Canada: how much is withheld and what you really owe
Most people find out about RRSP withdrawal tax the hard way: they ask for $10,000, receive $8,000 and wonder where the rest went. Then in the spring a tax bill shows up on top. The withholding rate and the tax you actually owe are two different things, and mixing them up is the expensive mistake. Here are the CRA withholding rates, how the withdrawal lands on your return, the two programs that avoid withholding, and a worked example with the arithmetic shown.
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Withholding rates by amount
The CRA sets the rate your RRSP issuer must withhold on a lump-sum withdrawal by Canadian residents. The rate depends on the size of each withdrawal, not on your income:
| Amount withdrawn | Withheld outside Quebec | Withheld in Quebec (federal part) |
|---|---|---|
| Up to $5,000 | 10% | 5% |
| Over $5,000, up to and including $15,000 | 20% | 10% |
| Over $15,000 | 30% | 15% |
The rate applies to the whole withdrawal, not just the slice above each line. A $6,000 withdrawal has 20% withheld on all $6,000 ($1,200), not 10% on the first $5,000 and 20% on the rest. Withholding tax is a prepayment sent to the CRA on your behalf. You get credit for it when you file, the same way you do for tax deducted from a paycheque.
The CRA also warns that the amount withheld may be less than the tax you owe at your tax bracket, so you may have to pay more when you report the withdrawal. For non-residents of Canada the withholding rate is 25%, unless a tax treaty reduces it.
How Quebec differs
For RRSP funds held in Quebec, the federal withholding is the lower 5%, 10% or 15% shown above, and Quebec also withholds provincial tax from the withdrawal. The CRA tells people in this situation to contact their financial institution or Revenu Québec for the provincial details, and the combined amount you see taken off is what to plan around. The result is often similar in total to the rest of Canada, but split between two governments, so check the slip or confirmation before you decide how much to withdraw.
How the withdrawal is added to income
The CRA's guidance is that you generally pay tax when you cash in, make withdrawals or receive payments from an RRSP. Inside the plan, growth is sheltered; the moment money leaves, it becomes taxable. The amount is added to your other income for that calendar year and taxed at your marginal rates, which is why a withdrawal in a high-income year costs more than the same withdrawal in a low-income year. If you withdraw from a spousal RRSP, the CRA says the amount can be taxable to your spouse or common-law partner instead; see our spousal RRSP guide for the attribution rules.
Your institution reports the withdrawal and the tax withheld on a T4RSP slip, and the figures flow to your return. Withholding is credited against your total tax. If the withheld tax is more than you owe, you get the difference back as part of your refund. If it is less, you owe the balance. To see which bracket the extra income lands in, use our 2026 tax brackets guide.
One more cost is easy to miss. A withdrawal usually means the contribution room you used is not simply handed back the way it is with a TFSA. Check your RRSP deduction limit on your notice of assessment before you plan to put the money back, and read our RRSP explainer and the TFSA recontribution rule to see the difference.
Worked example
Sam lives in Ontario, earns $55,000 of taxable income from work, and withdraws $12,000 from an RRSP in 2026. This example uses the 2026 federal and Ontario brackets and ignores credits, the Ontario surtax and the Ontario Health Premium, so the real bill will differ a little.
| Step | Arithmetic | Amount |
|---|---|---|
| Withholding rate for $12,000 | over $5,000 up to $15,000 | 20% |
| Tax withheld | $12,000 x 20% | $2,400 |
| Cash Sam receives | $12,000 - $2,400 | $9,600 |
| Taxable income after withdrawal | $55,000 + $12,000 | $67,000 |
| Federal tax on the extra $12,000 | $3,523 x 14% + $8,477 x 20.5% | $2,231 |
| Ontario tax on the extra $12,000 | $12,000 x 9.15% | $1,098 |
| Estimated tax on the withdrawal | $2,231 + $1,098 | $3,329 |
| Still owing at filing | $3,329 - $2,400 | about $929 |
The federal figure splits because Sam's $55,000 sits $3,523 below the $58,523 point where the federal rate rises from 14% to 20.5%, so only that first slice is taxed at 14%. The rest of the withdrawal is taxed at 20.5% federally and 9.15% in Ontario (Sam is already above Ontario's $53,891 line). Here the combined marginal rate on the top of the withdrawal is 29.65%, higher than the 20% withheld. If Sam had no other income that year, the same $12,000 would be taxed at much lower rates and the withholding would likely have been more than enough. That is the whole point: the withholding rate does not know your income.
Does splitting withdrawals help?
Withholding is applied per withdrawal. Three separate $4,000 withdrawals attract 10% each ($1,200 total), while one $12,000 withdrawal attracts 20% ($2,400). Smaller pieces mean less cash taken off at the time, and that is all they do. Your actual tax is still based on the $12,000 added to your income, so Sam would still owe roughly the same $3,329 and would simply owe more at filing time. Splitting is a cash-flow choice, not a tax saving, and some institutions charge a fee per withdrawal. If you split, set aside the difference so the spring bill does not catch you short.
What does reduce the bill is controlling the year the income lands in. A year with a leave, a layoff or a low income is a cheaper time to withdraw than a peak earning year, and spreading a large withdrawal across two calendar years can keep more of it in lower brackets. The tradeoff is that money out of the RRSP stops growing tax-sheltered.
HBP and LLP exceptions
Two federal programs let you take money out of an RRSP without it being taxed, as long as you repay it:
- Home Buyers' Plan (HBP): the CRA lists the withdrawal limit as $60,000, for buying or building a qualifying home for yourself or for a specified disabled person. Repayment is spread over 15 years. For a first withdrawal made between January 1, 2026 and December 31, 2028, the first repayment year is the fifth year after the withdrawal year, so a 2026 withdrawal means repayments begin in 2031. You can also combine an HBP withdrawal with a qualifying FHSA withdrawal for the same home; see using the FHSA and HBP together.
- Lifelong Learning Plan (LLP): for full-time education or training for you or your spouse or common-law partner. The CRA says the repayment period is generally 10 years, and any amount not repaid when due is included in your income for that year.
The CRA states that qualifying HBP or LLP withdrawals are made without tax withheld by your RRSP issuer, and that you should not report them as income on your return. The catch is the repayment schedule: if you repay less than the minimum required in a year, the shortfall is added to your income. Contributions made in the 89 days before an HBP or LLP withdrawal may not be fully deductible, so time contributions with care. Our HBP repayment guide and first-time buyer programs overview cover the mechanics.
Before you withdraw
- Check your marginal rate. Compare it with the withholding rate. If your marginal rate is higher, set aside the gap.
- Look at timing. A withdrawal in January and one in December of the same year are in the same tax year. Moving it across the calendar-year line can change the bracket it falls in.
- Consider cheaper sources. A TFSA withdrawal has no tax, and a RRSP versus TFSA comparison shows which account to tap first for emergencies. Building a cash buffer in an emergency fund means you rarely need to raid retirement savings.
- Mind benefit-tested income. Added income can reduce income-tested benefits, which is worth checking before a large withdrawal; our GIS guide is one example.
- Know the deadline. If the withdrawal is part of a contribution plan, see the RRSP contribution deadline.
For more calculators, visit the tools page.
Questions people ask
How much tax is withheld on an RRSP withdrawal in Canada?
The CRA withholding rates for residents are 10% on up to $5,000, 20% on over $5,000 up to $15,000, and 30% on over $15,000. In Quebec the federal rates are 5%, 10% and 15%, and Quebec also withholds provincial tax.
Is RRSP withdrawal tax the final tax?
No. Withholding is a prepayment. The full withdrawal is added to your income for the year and taxed at your marginal rates, so you may owe more or get some back when you file.
How do I avoid withholding tax on an RRSP withdrawal?
Qualifying Home Buyers' Plan and Lifelong Learning Plan withdrawals are made without tax withheld, as long as you repay them on schedule. Otherwise, a normal withdrawal is always subject to withholding.
Does the withdrawal count as income?
Yes. The CRA says you generally pay tax when you cash in or withdraw from an RRSP. The amount is reported on a T4RSP and added to your other income for the year.
Do I pay more tax if I withdraw in smaller pieces?
Smaller withdrawals have lower withholding rates, but your actual tax is based on the total added to your income, so splitting changes the cash you receive now, not the tax you owe.
How does Quebec withholding differ?
For RRSP funds held in Quebec, the federal withholding is 5%, 10% or 15% by amount, and Quebec also withholds provincial tax. Ask your institution or Revenu Québec for the provincial amount.
Do HBP and LLP withdrawals count as income?
Not if they qualify and you repay on schedule. The CRA says qualifying withdrawals have no tax withheld and should not be reported as income, but any shortfall in the required repayment for a year is added to income.
What happens to a non-resident's RRSP withdrawal?
The CRA says withholding is 25% for non-residents, unless a tax treaty reduces it.
Looni reads your statements and flags fees, interest and forgotten charges, so more of your money stays yours. Read-only, no advice.
Sources
Canada Revenue Agency, Tax rates on withdrawals (withholding rates by amount, Quebec rates, the shortfall warning, 25% for non-residents), Making withdrawals (tax when you cash in), HBP and LLP withdrawals (no tax withheld, not reported as income, 89-day rule), What is the Home Buyers' Plan ($60,000 limit, 15-year repayment, 2026 to 2028 deferral), Lifelong Learning Plan (10-year repayment), Saving for the future (withdrawals taxable, spousal RRSP) and 2026 tax rates and brackets (federal and Ontario brackets used in the example). The Sam example is illustrative; the arithmetic is ours and ignores credits, the Ontario surtax and the Ontario Health Premium.