RRSP room accrues at 18% of earned income, and salary is earned income while dividends are not. Enter the room you want to see next year and this calculator solves for the T4 salary that creates it, along with the CPP that salary triggers on both sides of the payroll. Figures reviewed for the 2025 tax year.
Your target room
How it works. New RRSP room is 18% of the prior year's earned income, capped at the annual dollar limit ($32,490 for 2025). The calculator divides your target by 18% to find the salary that generates it — a target above the cap is clamped, because no salary can create more room than the limit. Dividends create no room at all, which is why owner-managers who want RRSP room must run payroll.
T4 salary required
$0
creates $0 of new room next year; personal tax on that salary is roughly $0 in your province
The room shows up NEXT year — salary paid in 2025 becomes room on your 2026 notice of assessment. Dividends create no RRSP room at all, however large.
An estimate is a starting point. Get your real number.
This calculator uses published rates. Your actual position depends on the credits, deductions and structure behind your numbers.
- A professional tax accountant reviews your figures, not a formula
- Fixed quote before any work starts
- You pay after you approve the filing
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How salary turns into RRSP room
Room accrues at 18% of earned income — salary, bonus and self-employment profit all count, but dividends, capital gains and investment income do not. Running the 18% backwards, every $10,000 of T4 salary creates $1,800 of room the following year, and hitting the $32,490 2025 maximum takes about $180,500 of salary. That salary is not free: it triggers CPP on both the employee and the corporation, and those employer contributions are the price of building room and CPP entitlement that a dividend-only owner never accrues. The room always arrives one year in arrears, so salary paid this year funds next year's contribution, not this year's.
For owner-managers this is one of the main levers in the salary-versus-dividend decision. A common pattern is paying at least enough salary to create the room you intend to use, then topping up with dividends — run the salary vs dividend calculator to see the full tax picture of each route, and the RRSP tax savings calculator to see what the resulting contribution is worth.
What this calculator does not cover
Pension adjustments are the big one: if your corporation sponsors an RPP or an individual pension plan (IPP), the pension adjustment reduces the RRSP room the salary would otherwise create, sometimes to nearly nothing — the 18% figure here assumes no registered plan. It also does not weigh whether salary or dividends is cheaper overall for your income and province, model payroll remittance timing, or account for room already carried forward on your notice of assessment. For a remuneration plan that sets the salary, the dividend and the RRSP contribution together, see our tax planning services.
| This year's salary | Next year's room |
|---|---|
| $50,000 | $9,000 |
| $100,000 | $18,000 |
| $150,000 | $27,000 |
| $180,500 | $32,490 (2025 max) |
Rates reviewed for the 2025 tax year by Udit Gupta, Founder and Tax Accountant. Federal and provincial rates change annually, and this tool is an estimate for planning rather than tax advice. Confirm current figures before relying on them for a filing.
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Rates and method reviewed 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. He is Big 4 trained, at Ernst & Young and Deloitte, and qualified as a chartered accountant in India and again in Malaysia. In 2014 he founded his accounting practice 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.
Sources. Canada.ca — Personal income tax · Income Tax Act (Justice Laws Website)