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Tax on RRSP and RRIF Withdrawals

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RRSPs RRIFs and TFSAs -> Withholding tax on RRIF and RRSP withdrawals

What Tax is Deducted From RRIF or RRSP Withdrawals?

Note that the withholding tax amounts deducted from your withdrawals are only estimates of what you will owe in taxes.  The amounts withheld will show on your tax return as taxes already remitted.  The withdrawal amount will be included in your taxable income.  Your total taxable income will determine the total taxes payable.  This may result in more or less taxes being payable.

RRSP Withdrawals Withholding Tax

When a single lump sum amount is withdrawn from an RRSP, the amount of tax that will be withheld is:

Withdrawal Amount % Federal Tax Withheld
From $0 to $5,000   10%  (5% in Quebec)
From $5,001 to $15,000    20% (10% in Quebec)
Greater than $15,000   30% (15% in Quebec)

Note that for non-residents of Canada, the withholding tax rate is 25%, but can be reduced by a tax treaty.

For a single withdrawal from RRSP funds held in the province of Quebec, there will also be 16% provincial income tax withheld.  See Revenue Quebec's Payments from an RRSP. a VRSP, a PRPP or a RRIF, and their information about single payments.

The above withholding tax rates also apply to in kind withdrawals, so sufficient cash must be available in the RRSP to pay the tax.

RRIF Withdrawals Withholding Tax

No tax is withheld when the minimum amount is withdrawn from a RRIF.  When withdrawals in excess of the minimum amount are made, the above RRSP lump sum withholding tax rates apply.  For further information on this topic, see the Canada Revenue Agency (CRA) document Withholding tax on payments from a RRIF.  For Quebec, the amount withheld from a single payment from a RRIF will be 16% of the amount exceeding the minimum amount.

The withdrawal from the RRIF is included in the taxpayer's taxable income, so depending on the individual's circumstances, tax may be payable when the tax return is filed.

The minimum withdrawal amount was waived in 2007 for RRIF owners who turned 70 or 71 in 2007, and in 2008 for RRIF owners who turned 71 in 2008.  However, withdrawals up to the normal minimum withdrawal amount were still not subject to withholding tax.

Fees on RRSP or RRIF Withdrawals

There may be fees charged by your brokerage or financial institution when a withdrawal is made from an RRSP or RRIF.  These fees are not tax deductible.  This applies if they are paid by the RRSP or RRIF or from a non-registered account.

Also on TaxTips.ca

bulletCRA warnings regarding schemes which promise tax-free RRSP or RRIF withdrawals.
bulletGet your money out of RRSPs tax-free (sort of) - to see how you can shelter your RRSP withdrawals to save tax

CRA Resources

bulletTax Rates on Withdrawals
bulletTax Treaties

Tax Tip:  Get INDEPENDENT advice from a tax professional before investing in tax-saving "schemes"  that promise to get your money out of your RRSP without paying tax.

Revised: November 10, 2016

 

 

 

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