How it's calculated
An RRSP contribution is deducted from your income, so you pay less federal and provincial income tax. The calculator works out your 2026 income tax twice, once without the deduction and once with it, using the same CRA and Revenu Québec formulas as the Canada income tax calculator. The difference is the tax you save.Canada Revenue Agency
- How much you can deduct. Your RRSP deduction limit is 18% of last year's earned income, up to the 2026 dollar limit of $33,810, less any pension adjustment, plus unused room from earlier years. Your exact limit is on your Notice of Assessment. If you leave the limit blank, the calculator estimates it as 18% of the salary you enter, up to the dollar limit.Canada Revenue Agency
- What changes. Federal and provincial income tax, including Ontario's surtax and Health Premium, which are based on taxable income. CPP, EI and QPIP do not change, because they are based on your pay before the deduction.
- Over-contributions. Contributions above your deduction limit save no tax this year, and unused contributions more than $2,000 over the limit may be taxed at 1% a month.Canada Revenue Agency
The formula
- Deduction = the lesser of your contribution and your deduction limit.
- Tax without = federal tax + provincial tax on your salary.
- Tax with = federal tax + provincial tax on your salary minus the deduction.
- Tax saved = tax without − tax with. Net cost = contribution − tax saved.
Because tax brackets are progressive, a large contribution can drop part of your income into a lower bracket, so the saving per dollar can be less than your top marginal rate.
Worked example
On a $75,000 salary in Ontario, a $5,000 RRSP contribution saves $1,633 in income tax, so it really costs you $3,368.
| 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 |
On a $120,000 salary in British Columbia the same contribution saves $1,709, and in Quebec $2,140.
Assumptions and limitations
- Salary income with basic credits. Tax is worked out on a salary with only the basic personal amounts claimed. Other income, deductions and credits change your marginal rate and the saving.
- Tax year 2026. Contributions made in the first 60 days of 2027 can also be deducted on your 2026 return; the 2027 figures are not modelled.
- Refund timing. You get the saving as a refund when you file, or on each paycheque if the contribution goes through payroll. You can also choose not to deduct a contribution this year and carry it forward to a later year.Canada Revenue Agency