ELI5 summary
The withholding rates
When you take money out of an RRSP, the financial institution must withhold tax and send it to the CRA. Outside Quebec the rates are:
| Amount withdrawn | Withholding |
|---|---|
| Up to $5,000 | 10% |
| $5,001 to $15,000 | 20% |
| More than $15,000 | 30% |
For Quebec residents the federal portion is 5%, 10% and 15% on the same bands, and Revenu Québec requires a separate provincial withholding on top. The rate is decided by the size of each withdrawal, not by your income, which is exactly why it rarely matches the final tax.
What you actually owe
The full withdrawal is added to your income for the year and taxed at your marginal rate, federal plus provincial. The withholding is simply credited on your return like tax deducted from a paycheque. Two things follow:
- High earners under-withhold. Someone in a 43% bracket who withdraws $20,000 has 30% withheld and owes the other 13% at filing.
- Low earners over-withhold. Someone in a 19% bracket who withdraws $10,000 has 20% withheld and gets a small refund.
Worked example
Ontario, $70,000 of other taxable income, $20,000 RRSP withdrawal. Withholding is 30%, or $6,000. Our estimator puts 2026 tax at $12,382 on $70,000 and $18,462 on $90,000, so the withdrawal really costs $6,080. Balance owing at filing: about $80.
Ontario, $35,000 of other income, $10,000 withdrawal. Withholding is 20%, or $2,000. The extra tax on $10,000 at this level is about $1,905 (19.05%), so roughly $95 comes back as a refund.
Show the math
Tax on withdrawal W = tax(other income + W) − tax(other income), using the same before-and-after method as our RRSP estimator, run in reverse. Withholding is a credit on line 43700 of the T1. Withholding is applied per withdrawal, so three separate $5,000 withdrawals each attract 10% while a single $15,000 withdrawal attracts 20%; the final tax is identical either way, only the timing of the cash differs. Institutions may withhold at the higher rate if withdrawals are clearly part of one series.
Withdrawals with no withholding
- Home Buyers’ Plan withdrawals up to $60,000 and Lifelong Learning Plan withdrawals up to $20,000 are tax-free at withdrawal and repaid over time, so nothing is withheld.
- RRIF minimum amounts. Once an RRSP becomes a RRIF, the annual minimum comes out with no withholding. Amounts above the minimum are withheld at the rates above.
- Direct transfers between RRSPs, or from an RRSP to a RRIF or FHSA, are not withdrawals at all.
Three consequences people miss
Room does not come back. Unlike a TFSA, an RRSP withdrawal permanently uses the room the contribution consumed. Withdrawing $20,000 and recontributing it later needs $20,000 of new room.
It counts as income everywhere. The withdrawal raises net income for the Canada Child Benefit, GST/HST credit, OAS recovery tax and GIS. For retirees on GIS the combined loss can exceed half the withdrawal.
A low-income year is the cheapest time. Parental leave, a sabbatical, a year between jobs or early retirement before pensions begin are the windows where an RRSP withdrawal is taxed at 14% federally plus the lowest provincial rate. Deliberate withdrawals in those years, sometimes moved straight into a TFSA, are one of the most effective planning moves available.
CRA: Tax rates on withdrawalsKey takeaways
- Withholding is 10%, 20% or 30% by withdrawal size; your marginal rate decides the real cost.
- Expect a balance owing at high incomes and a small refund at low ones.
- HBP, LLP and RRIF minimums are withheld at 0%.
- Room is not restored, and the withdrawal counts as income for every benefit test.