How RRSP Refunds Work
One of the biggest benefits of contributing to an RRSP is the tax refund.
RRSP contributions reduce your taxable income, which lowers the amount of tax you owe.
Example RRSP Refund
Income: $100,000
RRSP contribution: $10,000
Taxable income becomes:
$90,000
If your marginal tax rate is about 35%, your refund may be approximately:
$3,500
Why the Refund Happens
Canada uses a progressive tax system.
When your taxable income decreases, you move into lower tax brackets.
This results in a refund.
Smart Ways to Use the Refund
Many Canadians:
- reinvest the refund into their RRSP
- contribute to their TFSA
- pay down debt
Related Guides
- RRSP contribution limits
- RRSP vs TFSA comparison