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Tax on RRSP 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?

When a single lump sum amount is withdrawn from an RRSP, the amount of tax that will be withheld is:

Withdrawal Amount % 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 Québec, there will also be 16% provincial income tax withheld.  See Revenue Quebec's Payments from an RRSP or a RRIF.

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

Note that the above withholding tax amounts are only estimates, which you 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.

No tax is withheld when the minimum amount is withdrawn from a RRIF.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.

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.

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: August 12, 2014

 

 

 

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