A Registered Retirement Savings Plan (RRSP) remains one of the most impactful methods for Canadians to build retirement savings and lower taxable income. It is true that contributions to an RRSP present immediate taxation advantages. However, it is the withdrawal phase—particularly in retirement or upon emigration—that generates major questions.
How much of RRSP is taxable should be essentially acknowledged in order to prevent surprise taxation bills. No matter if you reside in Canada, are a non-resident, or hold dual U.S. citizenship, recognizing the RRSP withdrawal tax rate and surrounding implications in line with Canadian and foreign tax laws is critical.
This guide evaluates taxation scenarios for residents as well as non-residents. We further explain the mechanics of the RRSP tax deduction and indicate important matters around RRSP and U.S. taxation in 2025.
It should be acknowledged that contributing to a Registered Retirement Savings Plan (RRSP) presents an immediate RRSP tax deduction. It is correct that every dollar contributed lowers the taxable income for that year. For instance, a $10,000 contribution can have a reducing impact on your income by the same amount—potentially saving you between $3,000 and $4,000, in accordance with the marginal tax rate.
These deductions indeed help now. Yet, it is important to remember that withdrawals are taxed later. Within this scope, recognizing how much of RRSP is taxable when you start drawing from it—no matter in retirement or as a non-resident—is vital. The RRSP withdrawal tax rate can vary in parallel to the residency status and income level as well as cross-border agreements if you are influenced by RRSP and U.S. taxation.
When you make a withdrawal from the RRSP, the amount is taken into consideration as taxable income. Therefore, it should be reported in the same tax year. The RRSP funds are simply taxed at your marginal rate, no matter if you are taking out a small amount or cashing in the entire account.
To prepay some of this tax, financial institutions must withhold:
In Québec, federal withholding is 5/10/15%, plus additional provincial withholding (about 14%). Your final tax owing is calculated when you file your return.
It is natural to wonder how much of RRSP is taxable. The answer changes in accordance with not only the amount withdrawn but also the residency status. For non-residents, Canada applies a flat 25% withholding tax on RRSP withdrawals. Some tax treaties reduce this rate. For example, under the Canada–U.S. treaty, certain periodic payments from a converted RRSP (RRIF) may qualify for a 15% rate, but lump-sum withdrawals usually remain subject to 25%.
Cross-border implications matter, too. If you are a U.S. citizen or resident, RRSP and U.S. taxation should be fundamentally acknowledged in order to prevent double taxation and reporting issues.
It is true that most RRSP withdrawals are taxed. But two federal programs enable temporary tax-free access—provided you repay the funds within a set period. The mentioned exceptions are very important in terms of determining how much of RRSP is taxable in a given year.
It should be noted that these are the only structured programs that permit withdrawals without generating the standard RRSP withdrawal tax rate. However, they apply only to Canadian residents—non-residents and individuals subject to RRSP and U.S. taxation are generally not eligible to participate in such programs once their residency status changes.
Leaving Canada does not close the RRSP—but it changes how the withdrawals are taxed. In the context of RRSP for non-residents, as it was mentioned above, the Canadian government applies a flat 25% withholding tax on RRSP withdrawals, regardless of the amount. This is usually higher than what residents pay in accordance with the usual RRSP withdrawal tax rate.
However, Canada has tax treaties with several countries—covering the U.S.—that may have a lowering impact on this rate. For example, under the U.S.-Canada tax treaty, certain periodic withdrawals from a RRIF may qualify for a reduced 15% rate, but lump-sum RRSP withdrawals typically remain subject to 25%.
The answer to how much of RRSP is taxable as a non-resident varies in line with both Canadian rules and how your new country treats RRSP income. U.S. citizens and residents must still report RRSP accounts annually on Form 8938 and/or FBAR (FinCEN Form 114) if thresholds are met. Under IRS Rev. Proc. 2014-55, tax deferral on RRSP income is automatic, so no special election is needed.
Once retirement approaches, the question shifts from contribution to strategy: how much of RRSP is taxable—and how do you minimize it?
We present specific proven methods below:
Thoughtful withdrawal planning—specifically when combined with the RRSP tax deduction history—can present assistance in making sure that the retirement income works harder for you.
Knowing how much of RRSP is taxable—and when—can establish a real distinction in how much of the savings individuals keep. From claiming the RRSP tax deduction during the working years to managing the RRSP withdrawal tax rate in retirement or abroad, every decision has undeniable influence on the overall financial outcome. By leveraging the compatible and smart strategies, your RRSP remains a valuable part of the long-term financial plan—no matter where life takes you.
If you need any professional assistance, contact Watter CPA today. Our expert team is ready to present 360 degree support with RRSP taxation.
Yes, but under the U.S.-Canada tax treaty, RRSP and U.S. taxation is deferred until withdrawal if reported correctly.
It is correct that withdrawals are taxed as income. RRSP withdrawals are taxed at the marginal income tax rate. Financial institutions withhold 10%, 20%, or 30% (5/10/15% in Québec) as a prepayment. Yet, the final tax is calculated once you file your return.
Each dollar lowers the taxable income by the same amount. This is your RRSP tax deduction.
Leverage the Home Buyers’ Plan or Lifelong Learning Plan—and repay on time in order to prevent taxation.
You can keep it, but as a non-resident, withdrawals are taxed at 25% unless reduced by a treaty.
