Q&A: RRSP/RRIF Withdrawals

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Do you get a break if you make small withdrawals from your RRSP?


Q – I understand that if you withdraw less than $5,000 from your RRSP, you pay 10% tax. But if you withdraw from your RRIF at the end of the year you pay the full taxes. Is this correct? – George N.


A – There’s a surprising amount of confusion about this. In fact, you’ll pay the same tax whether the withdrawal is from an RRSP or RRIF. The misunderstanding is tied to the fact that there is a withholding tax on RRSP withdrawals. If they are less than $5,000, that rate is 10% in all provinces except Quebec. But that’s just a down payment. You must report the RRSP withdrawal as regular income when you file your return. You’ll get credit for the 10% but if the actual tax owing is more based on your marginal rate, you’re on the hook for the difference. – G.P.


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