A registered retirement savings plan (RRSP) contribution is one of the few ways most Canadian employees can lower their income tax. The contribution is deducted from your income, so you pay less tax this year, and the money is taxed later when you take it out. This guide shows how much tax an RRSP deduction saves in 2026, how your deduction limit is worked out, and why the same contribution is worth more in some provinces than others.
The tax saved is calculated live by the RRSP tax savings calculator. It compares your 2026 federal and provincial income tax on a salary with and without the deduction, using the Canada Revenue Agency’s (CRA) payroll formulas, and assumes you claim only the basic personal amounts. This page is about tax only; it makes no assumptions about what the money earns inside the plan.
The short version
On a $75,000 salary in Ontario, a $5,000 RRSP contribution saves $1,633 in income tax for 2026, so the contribution costs you $3,368 after tax. That is 32.6% of the amount you put in.
| Line | Amount |
|---|---|
| RRSP contribution | $5,000 |
| Deducted this year | $5,000 |
| Income tax without the contribution | $12,704 |
| Income tax with the contribution | $11,072 |
| Federal tax saved | $1,025 |
| Provincial tax saved | $608 |
| Total tax saved | $1,633 |
| Net cost of the contribution | $3,368 |
How an RRSP deduction saves tax
An RRSP contribution is a deduction, not a credit. It comes off your income before tax is worked out, so it saves tax at your marginal rate, the combined federal and provincial rate on your top dollars of income. On $75,000 in Ontario, your income sits in the 20.5% federal bracket and the 9.15% Ontario bracket, so each dollar deducted saves both. The calculator’s marginal rate of 28.5% is a little lower, because it measures an extra dollar of salary, a small part of which goes to CPP2. In this example the saving is higher still, because the deduction also lowers the Ontario Health Premium, as explained below.
The saving is split between the two governments. In the example above, federal tax falls by $1,025 and Ontario tax by $608.
Your 2026 RRSP deduction limit
Your deduction limit for 2026 is 18% of your earned income for 2025, up to the 2026 dollar limit of $33,810. It is reduced by any pension adjustment if you belong to a workplace pension plan, and increased by any room you haven’t used in earlier years, which carries forward indefinitely.Canada Revenue Agency
The exact figure is on your latest notice of assessment and in your CRA account. The calculator estimates it from the salary you enter if you don’t give your own figure: on $60,000, 18% gives $10,800 of room, while on $200,000 the dollar limit caps it at $33,810.
Contributions above your limit don’t reduce your tax and can be charged a monthly penalty tax once the excess passes a small allowance, so check your limit before making a large contribution.Canada Revenue Agency
What $5,000 saves in each province
The same contribution on the same salary saves different amounts across the country, because provincial rates differ. For a $5,000 contribution on a $75,000 salary:
| Province or territory | Tax saved | Federal share | Provincial share | Net cost |
|---|---|---|---|---|
| Alberta | $1,525 | $1,025 | $500 | $3,475 |
| British Columbia | $1,410 | $1,025 | $385 | $3,590 |
| Manitoba | $1,663 | $1,025 | $638 | $3,338 |
| New Brunswick | $1,725 | $1,025 | $700 | $3,275 |
| Newfoundland and Labrador | $1,750 | $1,025 | $725 | $3,250 |
| Northwest Territories | $1,455 | $1,025 | $430 | $3,545 |
| Nova Scotia | $1,859 | $1,025 | $834 | $3,142 |
| Nunavut | $1,375 | $1,025 | $350 | $3,625 |
| Ontario | $1,633 | $1,025 | $608 | $3,368 |
| Prince Edward Island | $1,855 | $1,025 | $830 | $3,145 |
| Quebec | $1,806 | $856 | $950 | $3,194 |
| Saskatchewan | $1,650 | $1,025 | $625 | $3,350 |
| Yukon | $1,475 | $1,025 | $450 | $3,525 |
Outside Quebec the federal share is the same everywhere, 20.5% of the contribution at this income, so the whole difference comes from provincial and territorial rates. In Quebec the federal share is smaller, because of the Quebec abatement of 16.5%, but Quebec’s higher rates more than make up for it.
Savings at different incomes
Because the saving follows your marginal rate, the same contribution is generally worth more as your income rises, though not in a straight line. At $75,000 the saving includes a step of the Ontario Health Premium, which is why it beats the figure at $100,000, where part of the deduction falls below the start of the Ontario surtax. For $5,000 in Ontario:
| Salary | Tax saved | Saving per dollar | Net cost |
|---|---|---|---|
| $50,000 | $1,103 | 22.1% | $3,898 |
| $75,000 | $1,633 | 32.6% | $3,368 |
| $100,000 | $1,508 | 30.2% | $3,492 |
| $150,000 | $2,170 | 43.4% | $2,830 |
| $200,000 | $2,413 | 48.3% | $2,587 |
This is also why an RRSP deduction is often worth more in a year when your income is high. Your income for the year matters here, not just your salary: a bonus, a second job or investment income can all push more of your income into a higher bracket, and the deduction then saves more. You don’t have to deduct a contribution in the year you make it: you can carry the deduction forward and claim it in a later year, for example when a raise moves you into a higher bracket.Canada Revenue Agency
Contributing in Quebec
In Quebec the same contribution is deducted from both your federal and your Quebec income, so it saves both taxes, but the shares look different. Federal tax for Quebec residents is reduced by the Quebec abatement, so the federal part of the saving is smaller than elsewhere: on a $75,000 salary, a $5,000 contribution cuts federal tax by $856 and Quebec tax by $950.Revenu Québec As elsewhere, QPP, EI and Quebec Parental Insurance Plan premiums are unchanged, because they are based on your gross pay.
If you contribute through payroll in Quebec, your employer deducts the contribution from your pay before working out both the federal and the Quebec tax, so the saving shows up on each paycheque.
Bigger contributions save a little less per dollar
A large contribution can pull part of your income down into a lower bracket, so the last dollars you deduct save less than the first. On a $75,000 Ontario salary, with enough room:
| Contribution | Tax saved | Saving per dollar |
|---|---|---|
| $2,500 | $891 | 35.6% |
| $5,000 | $1,633 | 32.6% |
| $10,000 | $3,115 | 31.1% |
| $20,000 | $5,804 | 29% |
On this salary the first few thousand dollars also save a step of the Ontario Health Premium, which is why the saving per dollar starts high. The last row assumes $20,000 of deduction room, for example from unused room carried forward; on this salary alone, the estimated 2026 room would be $13,500.
Why the saving can beat your marginal rate
In the Ontario examples, the saving per dollar is sometimes higher than the marginal rate the calculator shows. The reason is the Ontario Health Premium. It is charged on taxable income and rises in steps, so a deduction that moves your taxable income below one of its steps saves part of the premium as well as income tax.Government of Ontario On a $75,000 salary, a $5,000 deduction takes taxable income back below $72,000, the level above which the premium rises from $600 to $750, and that difference is added to the income tax saved.
Other income-tested amounts can work the same way, such as the BC tax reduction for lower incomes and, on the return, credits and benefits based on net income. The calculator includes the premium and the BC reduction, but not benefits such as the Canada child benefit.
Refund or lower tax on each paycheque
How you get the saving depends on how you contribute:
- Through payroll. If your employer takes group RRSP contributions from your pay, they are deducted before tax is worked out, so you get the saving on every paycheque. On $75,000 in Ontario, $5,000 a year from pay cuts total deductions from $18,074 to $16,441.
- On your own. If you contribute directly, you claim the deduction on your return and get the saving as a refund, or a smaller balance owing. Contributions made in the early part of the following year, up to the CRA’s deadline, can count for 2026. You can also ask the CRA to let your employer reduce the tax taken from your pay, using form T1213.
Either way the total saving for the year is the same. CPP and EI don’t change, because they are based on your gross pay, not your taxable income.Canada Revenue Agency
What an RRSP deduction doesn’t do
An RRSP defers tax rather than removing it. Money you take out of an RRSP is added to your income and taxed in the year you withdraw it, and the financial institution withholds tax at source on the withdrawal.Canada Revenue Agency The deduction is worth the most when your tax rate when you withdraw the money will be lower than your rate now, which is why it tends to suit people in higher brackets. If you expect a higher rate later, the deduction is worth less than the figures above suggest.
These figures also leave out things that can change your real saving: other income, credits you claim on your return, and provincial low-income reductions applied on the return, none of which the payroll formulas include.
Work out your own saving
Enter your salary, province and contribution, and your deduction limit if you know it, to see your own 2026 tax saving.
$1,633
- Net cost of the contribution
- $3,368
- Federal tax saved
- $1,025
- Provincial tax saved
- $608
- Saving per dollar deducted
- 32.6%
- Marginal tax rate before contributing
- 28.5%
- Amount deducted
- $5,000
- Deduction room used
- $13,500
- 2026 RRSP dollar limit
- $33,810
- Room estimated as 18% of this income up to the 2026 RRSP dollar limit of $33,810. Your real limit is on your latest Notice of Assessment: it uses last year's earned income, pension adjustments and unused room carried forward.
- Tax saved is the drop in federal and provincial income tax on a salary, with only the basic personal amounts claimed. CPP, EI and QPIP do not change.
- You get the saving as a refund when you file, or on each paycheque if the contribution is made through payroll.
Tax you save: $1,633 on a $5,000 RRSP contribution
Show the breakdown
| Line | Amount |
|---|---|
| RRSP contribution | $5,000 |
| Deducted this yearwithin estimated room | $5,000 |
| Income tax without the contribution | $12,704 |
| Income tax with the contribution | $11,072 |
| Federal tax saved | $1,025 |
| Provincial tax saved | $608 |
| Total tax saved | $1,633 |
| Net cost of the contribution | $3,368 |
- You (net cost)$3,36867%
- Federal tax saved$1,02521%
- Provincial tax saved$60812%
To see how marginal rates build up across federal and provincial brackets, read the Canadian tax brackets guide. For your take-home pay after an RRSP contribution from pay, use the Canada income tax calculator.
These figures estimate the 2026 income tax saved on a salary, using the CRA’s and Revenu Québec’s published formulas. They are not tax or investment advice.
