Education Centre

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RRSP: How does it work?

Contributions to an RRSP can be deducted from your income taxes. While contributions can be made throughout the year, it is better to contribute early on to take advantage of the power of compounded growth, particularly since your investments will grow sheltered from taxes until their withdrawal.

You can contribute to an RRSP until the age of 71. During the year in which you turn 71, you must either:

  1. Convert your RRSP into an RRIF;
  2. Purchase a life annuity; and/or
  3. Withdraw all the funds from your RRSP.

If you withdraw from your RRSP, taxes will be withheld at the source as per the following:


  Quebec   Canada (except Quebec)
   Provincial  Federal  Federal
CDN $5,000 or less   16%  5%  10%
CDN $5,000.01 to
CDN $15,000
 16%  10%  20%
 CDN $15,000.01 and over  16%  15%  30%

Spousal RRSP

You may contribute to an RRSP registered in your spouse's name.

Any contribution made in your spouse's name becomes your spouse's property. It is therefore not possible for you to withdraw the contributions made in your spouse's name. However, you, as the contributing spouse, may deduct the contribution from your taxable income.

Note that for the two years following the contribution to your spouse’s RRSP, any withdrawal would be added to your earned income, as the contributor.

What is the Home Buyers’ Plan (HBP)?

The Home Buyers’ Plan allows you to buy or build a home by giving you the right to withdraw CDN $25,000 from your RRSP without having to pay taxes on this amount.

For a residence to be eligible under the HBP, it must be located in Canada, purchased or built before October 1st of the calendar year following the RRSP withdrawal, and used as your primary residence within a year of its purchase or construction at the latest.

The amount borrowed must then be reimbursed over a maximum of 15 years, and the minimum annual repayment will equal 1/15 of the total withdrawal. The first repayment must take place within the first 60 days of the 3rd year following the withdrawal. For instance, if your withdrawal occurs on July 5, 2014, you will have to make your first repayment by March 1, 2017. If the minimal repayment is not made each year, the “unpaid” amount will be added to your income for the year. Note that the repaid amounts are not considered new contributions to an RRSP and, as such, are not tax deductible.

For more details about your eligibility and the HBP repayment plan, visit the Canada Revenue Agency website.

What is the Lifelong Learning Plan (LLP)?

The LLP allows you to withdraw from your RRSP to finance full-time training or education for you or your spouse or common-law partner, without having to pay taxes on the withdrawal.

To be eligible to the LLP, you must:
  • Have an RRSP
  • Be a Canadian resident
  • Be enrolled, full time, in a qualifying training program at a designated educational institution

Qualifying programs must be at least three consecutive months and provided by a designated educational institution where you dedicate at least 10 hours per week to classes or homework.

The maximum withdrawal amount is CDN $10,000 per year, up to CDN $20,000 over a four-year period. You have 10 years to make repayments to your RRSP. If the minimum repayment amount is not met each year, it will be added to your taxable income for that year. No interest will be charged, but the repayment must be made in accordance with one of the following dates, depending on your situation:

  • The fifth calendar year following the year of the first LLP withdrawal; or
  • The second consecutive year in which you are not entitled to the education amount.

To learn more about the LLP and its criteria, visit the Canada Revenue Agency website.

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