Wondering how much to contribute to your RRSP to reduce your taxes? It's a question that comes up every year, especially as tax season approaches. A few simple guidelines can help you make informed choices. At the Fonds, we believe that everyone deserves a retirement that reflects their hard work. And a comfortable retirement is possible with good planning.
How does an RRSP help you reduce your taxes?
An RRSP is a powerful tool for preparing your retirement. Its main advantage? The money you contribute to it reduces your taxable income. This not only lowers your taxes, but also grows your savings tax-free until they're withdrawn.
The idea is simple. Every dollar you contribute to an RRSP reduces your taxable income by the same amount.
Here's a brief example:
- Let's say you earn a salary of $65,000 in a year.
- You contribute $5,000 to your RRSP.
- Your taxable income decreases to $60,000.
Depending on your tax rate,[1] this contribution could save you approximately $1,805 in taxes. It's like spending $3,195 to save $5,000. The higher your income, the greater the tax savings.
In addition, since RRSP contributions reduce your income, you may also be entitled to more generous tax credits in other areas (family allowance, solidarity tax credit, tax credit for child care expenses, etc.).
Calculate your maximum RRSP contribution
To figure out how much to contribute, you first need to know your RRSP contribution room. This is the maximum amount you can contribute to your RRSP without incurring a tax penalty.
The limit is generally 18% of your earned income for the previous year up to a certain annual maximum ($33,810 for 2026). Any contribution room you don't use in that year will roll over and can be used in subsequent years.
How to check your maximum contribution limit
There are several ways to determine your RRSP deduction limit:
- Log in to My Account on the Canada Revenue Agency website.
- Consult your notice of assessment for the previous year.
- Talk to a tax advisor or accountant who can analyze your overall situation and guide you in making contributions.
Take advantage of unused contribution room
Your unused contribution room has been accumulating year after year since 1991 with no time limit. If you haven't been contributing the maximum allowed, you can catch up at any time until age 71. After that, you may contribute to a younger spouse's RRSP.
Please note: Surpassing your contribution limit can result in significant tax penalties. The Canada Revenue Agency imposes a penalty of 1% per month on the excess portion (over a $2,000 buffer in most cases).
What you need to calculate your RRSP contribution
To determine your optimal RRSP contribution, you'll need to gather some information:
- Your taxable income for the current year
- Your RRSP deduction limit (available on your notice of assessment or in My Account)
- Your unused contribution room from previous years
- Deductions already applicable to your situation (e.g., contributions to a supplementary pension plan)
- Your short- and medium-term financial objectives
- Your current marginal tax rate
What is the marginal tax rate?
Canada and Québec have a progressive, tiered taxation system. This means that your income is divided into brackets, and each bracket is taxed at a different rate.
Why is this important? RRSP contributions reduce the income in your highest bracket first. This is your best source for tax savings.
Overview of 2026 combined rates (Québec + federal)
| Taxable income | Combined marginal rate |
|---|---|
| $16,453 to $18,952 | 11.7% |
| $18,953 to $54,345 | 25.7% |
| $54,346 to $58,523 | 30.7% |
| $58,524 to $108,680 | 36.1% |
| $108,681 to $117,045 | 41.1% |
| $117,046 to $132,245 | 45.7% |
| $132,246 to $181,440 | 47.5% |
| $181,441 to $258,482 | 50.0% |
| $258,483 and over | 53.4% |
Important notes:
- These rates are approximate and apply only to the portion of income in each bracket.
- The marginal rate represents the tax paid on each additional dollar earned.
- These rates combine federal and Québec taxes.
Calculate your tax savings
Good news: Once you know your marginal rate, estimating how much you'll save in taxes is easy.
The formula is as follows:
RRSP contribution × marginal rate = approximate tax savings
Here's a brief example:
- You contribute $5,000 to your RRSP.
- You earned $60,000 during the year. Your combined marginal rate (Québec + federal) is 36.12%.
- You'll save approximately $1,806 in taxes ($5,000 × 0.3612).
In other words, for every dollar you invest in your RRSP, you get back about 36 cents in tax savings. Not bad, eh?
Learn how to reduce your taxes with RRSPs
Knowing your limit and marginal rate is great, but to really maximize your tax savings, consider two more effective strategies.
01Maximize your RRSP+ contribution
If you contribute to an RRSP+ by subscribing to Fonds de solidarité FTQ shares, you can benefit from an additional 30% in tax savings[2] thanks to tax credits for labour-sponsored funds (15% provincial and 15% federal).
In concrete terms, for a maximum RRSP+ contribution of $5,000, you can get up to $1,500 in tax credits in addition to your RRSP deduction. This means you'll substantially lower your taxes while supporting the local economy.
Want to know exactly how much you could save based on your situation? Use our RRSP+ tax savings calculator to get a personalized estimate in just a few clicks.
02Change your tax bracket with a contribution
If your income is close to the upper limit of a tax bracket, a strategic RRSP contribution could move you into a lower bracket.
Here's an example: If your taxable income is $60,000 and your highest contribution level starts at $58,254, a contribution of a few hundred dollars could keep you from paying more tax on the last portion of your income.
We can help with your RRSP plan
Every financial situation is unique. How much should you contribute to reduce your taxes? How can you optimize your retirement savings? In addition to the RRSP, the TFSA or other FlexiFonds products might also be a good fit for you.
Our mutual fund advisors are here to answer your questions. We take the time to understand your current situation and objectives, then propose concrete solutions.
