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Learn exactly how TFSA contribution room is calculated, including annual limits, cumulative totals, and strategies to maximize your tax-free savings without overcontributing.
Read full articleYour tax savings equal your RRSP contribution multiplied by your marginal tax rate. For example, a $10,000 contribution at a 29.65% marginal rate saves you $2,965 in taxes.
The 2025 RRSP contribution limit is $32,490, which is 18% of your 2024 earned income, whichever is lower. The 2026 limit is approximately $34,000.
Excess RRSP contributions exceeding your deduction limit by more than $2,000 are subject to a 1% per month penalty tax on the excess amount.
RRSP contributions are tax-deductible but withdrawals are taxed as income. TFSA contributions are after-tax but withdrawals are tax-free. RRSP is better for high earners; TFSA is better for lower earners.
Yes, unused RRSP contribution room carries forward indefinitely. You can also carry forward unused deductions to future years without penalty.
Self-employed individuals earn RRSP room based on their net business income. The same 18% rule applies. RRSPs are especially beneficial for self-employed as there is no employer pension plan.
You have until March 2, 2026 (60 days after year-end) to make RRSP contributions that count toward your 2025 tax deduction.
A spousal RRSP allows a higher-earning spouse to contribute to a plan in their lower-earning partner's name, enabling income splitting in retirement. The contributor gets the tax deduction.