How an RRSP saves you tax
Contributions to a Registered Retirement Savings Plan (RRSP) are deducted from your taxable income. If you earn $85,000 and contribute $10,000, you're taxed as if you earned $75,000, and the tax already withheld from your paycheques on that $10,000 comes back as a refund. The refund is roughly your contribution multiplied by your marginal tax rate — the combined federal and provincial rate on your last dollar of income — so the same contribution saves more in a higher bracket or a higher-tax province.
The money then grows tax-deferred. You pay tax when you withdraw it, ideally in retirement when your income — and tax rate — is lower. By the end of the year you turn 71, an RRSP must be converted to a RRIF or annuity, or withdrawn.
Your RRSP contribution limit
New RRSP room each year is 18% of your previous year's earned income, up to a dollar maximum, minus any pension adjustment from a workplace pension plan. The maximum is $33,810 for 2026 and $35,390 for 2027. Unused room carries forward indefinitely. Your exact deduction limit is printed on your latest Notice of Assessment and in CRA My Account. You can over-contribute up to $2,000 without penalty; beyond that, a 1% per month tax applies.
Contribution deadline
Contributions made during the year and in the first 60 days of the following year can be deducted on that year's tax return. You don't have to claim the deduction right away — you can carry it forward to a year when your income and tax rate are higher.
RRSP or TFSA?
If your tax rate today is higher than you expect in retirement, the RRSP usually comes out ahead because you get the deduction at a high rate and pay tax later at a lower one. If you're in a low bracket now, a TFSA is often better. First-time home buyers can also use the FHSA, which combines an RRSP-style deduction with tax-free withdrawals for a home. A smart move many people use: invest the RRSP refund in a TFSA.
Worked example
An Ontario resident earning $85,000 has a combined marginal tax rate of about 29.65% (20.5% federal plus 9.15% provincial). Contributing $10,000 reduces taxable income to $75,000, which is still in the same brackets, so the refund is close to $2,965 — making the true cost of the contribution about $7,035. In Quebec, where provincial rates are higher, the same contribution produces a larger refund; in British Columbia, a slightly smaller one. Contributions that drop your income into a lower bracket earn a smaller refund on the portion below the bracket line, which the calculator accounts for.
Frequently asked questions
What is the RRSP limit for 2026?
How much tax refund will I get from my RRSP?
When is the RRSP deadline?
Are RRSP withdrawals taxed?
Sources & methodology
This calculator was last reviewed on November 2, 2026. Figures are based on the following official and primary sources:
- Canada Revenue Agency – How contributions affect your RRSP deduction limit
- Canada Revenue Agency – TFSA, RRSP and FHSA contribution limits
- Canada Revenue Agency, T4127 Payroll Deductions Formulas & T4032 tables (2026)
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