How an RRSP lowers your tax
An RRSP (Registered Retirement Savings Plan) contribution is deducted from your taxable income, so you pay tax on a smaller income. The savings are roughly your contribution multiplied by your marginal tax rate: the higher your income, the more each dollar you contribute saves.
Real cost = contribution − tax savings
Example: on a $60,000 salary, a $5,000 contribution saves about $1,217 in tax in Ontario and $1,516 in Quebec.
These savings often show up as a tax refund, because your employer withheld tax on your full salary. Your actual refund also depends on your other income, credits and withholdings for the year.
2026 limit and deadline
- Limit: 18% of your previous year's earned income, up to a maximum of $33,810 for 2026, plus unused room from past years. Your exact limit is on your notice of assessment from the Canada Revenue Agency.
- Deadline: contributions made by March 1, 2027 can be deducted on your 2026 tax return.
- Over-contributions: you can go up to $2,000 over your limit without penalty. Beyond that, the excess is taxed at 1% per month.
Tax savings on a $5,000 contribution
| Annual salary | Savings in Quebec | Savings in Ontario |
|---|---|---|
| $40,000 | $1,284 | $1,102 |
| $50,000 | $1,285 | $1,103 |
| $60,000 | $1,516 | $1,217 |
| $70,000 | $1,806 | $1,483 |
| $80,000 | $1,806 | $1,482 |
| $100,000 | $1,806 | $1,508 |
| $120,000 | $2,140 | $1,995 |
| $150,000 | $2,373 | $2,170 |
2026 marginal tax rates
Your marginal rate is the tax you pay on each additional dollar of income, so it's also the tax you save on each dollar you put in your RRSP. If your contribution brings your taxable income below a threshold, your last dollars save less than your first ones.
Ontario
| Taxable income | Combined | Federal | Ontario |
|---|---|---|---|
| Up to $53,891 | 19.05% | 14.00% | 5.05% |
| $53,891 – $58,523 | 23.15% | 14.00% | 9.15% |
| $58,523 – $94,901 | 29.65% | 20.50% | 9.15% |
| $94,901 – $107,785 | 31.48% | 20.50% | 10.98% |
| $107,785 – $111,810 | 33.89% | 20.50% | 13.39% |
| $111,810 – $117,045 | 37.91% | 20.50% | 17.41% |
| $117,045 – $150,000 | 43.41% | 26.00% | 17.41% |
| $150,000 – $181,440 | 44.97% | 26.00% | 18.97% |
| $181,440 – $220,000 | 48.26% | 29.29% | 18.97% |
| $220,000 – $258,482 | 49.82% | 29.29% | 20.53% |
| Over $258,482 | 53.53% | 33.00% | 20.53% |
Quebec
| Taxable income | Combined | Federal | Quebec |
|---|---|---|---|
| Up to $54,345 | 25.69% | 11.69% | 14.00% |
| $54,345 – $58,523 | 30.69% | 11.69% | 19.00% |
| $58,523 – $108,680 | 36.12% | 17.12% | 19.00% |
| $108,680 – $117,045 | 41.12% | 17.12% | 24.00% |
| $117,045 – $132,245 | 45.71% | 21.71% | 24.00% |
| $132,245 – $181,440 | 47.46% | 21.71% | 25.75% |
| $181,440 – $258,482 | 50.21% | 24.46% | 25.75% |
| Over $258,482 | 53.31% | 27.56% | 25.75% |
Combined federal and provincial rates on ordinary income, for an individual with no special credits. Full explanation: 2026 marginal tax rates.
RRSP or TFSA?
An RRSP lowers your tax today, but withdrawals are taxed later. A TFSA gives no deduction, but withdrawals are tax-free. As a general rule, an RRSP is more advantageous if your tax rate is higher today than it will be in retirement. The best choice depends on your situation, which makes it a good question for a financial planner.