A Registered Retirement Savings Plan lets Canadians deduct contributions from income and defer tax on investment growth until the funds are withdrawn in retirement.
Contributions to an RRSP are tax-deductible, reducing your taxable income in the year you contribute, and investments grow tax-deferred inside the plan. Tax is paid only on withdrawal, ideally in retirement when your income and tax rate are lower. Contribution room is 18% of earned income up to an annual maximum, plus any carried-forward room.
Because only salary (not dividends) generates earned income, an owner-manager's choice to pay salary partly determines their RRSP room. Withdrawals are fully taxable, except under the Home Buyers' Plan and Lifelong Learning Plan, which allow temporary tax-free withdrawals for specific purposes.
You contribute $18,000 to your RRSP and deduct it, cutting your taxable income by $18,000 this year. The investments grow tax-free until you withdraw them in retirement, when they are taxed at your then-lower rate.
Primary sources
- Income Tax Act, s. 146(1)
- Income Tax Act, s. 60(i) Premium or payment – FHSA, PRPP, RRSP or RRIF
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HST combines the 5% federal GST with a provincial component in five participating provinces. For 2026 the combined rates are 13% in Ontario, 15% in New Brunswick, Newfoundland and Labrador, and Prince Edward Island, and 14% in Nova Scotia since 1 April 2025. Elsewhere you charge the 5% GST alone, or GST plus a separate provincial tax. The rate follows the province of supply, not where your business sits.
Income tax is tax charged on the income you earn in a year, levied by both the federal government and your province or territory. Rates are graduated, so successive slices of taxable income are taxed at higher rates, and credits such as the basic personal amount reduce the tax calculated. Employment income is taxed through payroll withholding and settled on your T1 return. Quebec residents also file a separate provincial return with Revenu Quebec.
The participating provinces that use the HST are Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. Quebec charges the federal GST plus its own QST, administered by Revenu Quebec. British Columbia, Saskatchewan and Manitoba charge the federal tax plus a separate provincial sales tax. Alberta and the territories charge the federal tax only. The tax you bill follows the place of supply, not the province your business operates from.
Balance owing is what you still have to pay after your return is assessed: tax for the year less the tax already withheld, instalments paid and refundable credits. A positive balance means money is due. A credit balance, usually shown with a minus sign, means you overpaid and a refund or transfer is coming. Your notice of assessment shows the balance as assessed, and My Account shows it updated for interest and payments received.
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Reviewed and fact-checked by Udit Gupta
Ex Big 4 — Ernst & Young, Deloitte · International & cross-border tax specialist · CPA Canada (In-Depth Tax Program) · Chartered accountant, ICAI & MIA
Udit Gupta has over 15 years of experience helping corporations and business owners with corporate structuring, corporate tax filing, bookkeeping, payroll, GST/HST, cross-border tax and CRA representation. Big 4 trained at Ernst & Young and Deloitte, and qualified as a chartered accountant in India and again in Malaysia, he founded his accounting practice in 2014 to serve entrepreneurs, startups and non-resident business owners across Canada. View full member bio.
The Institute of Chartered Accountants of India — member 521458 · Malaysian Institute of Accountants — member CA 44667 · Ex Big 4: Ernst & Young, Deloitte · CPA Canada (In-Depth Tax Program), completed 19 Dec 2023 · In-Depth GST/HST Part I, 12 Jul 2022 · Part II, 5 Jul 2023
Editorial policy. Every page is researched against primary sources — the Income Tax Act, CRA publications and CPA Canada guidance — and every rate or threshold is stated with the tax year it applies to.
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