Calculate the Tax Savings Generated by your RRSP Contribution in Canada for 2020 & 2021
When contributing to a Registered Retirement Saving Plan (RRSP), you are putting money aside which is exempt from taxes. It is a way to reduce your income tax payments, as long as you keep the funds in the plan. If, however, you cash out a portion or the totality of your RRSP, you will then need to pay taxes on the amount taken out.
The main advantage of a RRSP, other than reducing your tax payments, is easing your saving efforts for retirement. It allows you to accumulate savings in a simpler way. By being tax deductible, you invest your money first and then pay taxes on your yearly income minus the contribution, decreasing your tax payment and optimizing your savings for retirement.
There is a maximum contribution allowed based on many factors. Since there are specific attributes to each individual that can limit the contribution, the following calculator will intentionally not limit any amount. It will also assume that the entire contribution inserted is tax deductible, so you could also use the calculator for any 100% deductible amount, other than a RRSP. Note that the potential tax savings can't surpass the total tax you are supposed to pay for one fiscal year.
A person can contribute to a RRSP until March 1st every year, and the impact of the tax reduction would be applied the following month (in April) when you pay your income taxes to the provincial and federal governments. Therefore, the tax saving benefits when contributing to a RRSP in January and February, are applied on the previous fiscal year.
Try this calculator to evaluate your potential tax savings and compare it with other Canadian provinces. You could be surprised to find out how much you are able to save by contributing to a RRSP.
Please change the suggested values with your own amounts in the blue text boxes.
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