The Canadian government calculates tax penalties on withdrawals from a Registered Retirement Savings Plan based on the withdrawal's purpose and amount and the account holder's province, according to Investopedia. Account holders who withdraw money for any purpose other than retirement, purchasing a home or paying for educational expenses must pay withholding taxes. Rates outside Quebec are 10 percent of withdrawals under $5,000, 20 percent of withdrawals between $5,000 and $15,000, and 30 percent of withdrawals over $15,000, as of 2015.Continue Reading
Residents of Quebec are liable for even higher taxes on RRSP withdrawals, according to Investopedia. As of 2015, Quebec residents must pay withholding taxes amounting to 21 percent of withdrawals under $5,000, 26 percent on withdrawals between $5,000 and $15,000, and 31 percent of withdrawals over $15,000.
RRSP account holders can withdraw money before retirement to finance a home purchase or educational bills, though there are limits on the amount. The federal Home Buyers Plan allows a tax-free withdrawal of up to $25,000 for a home purchase, explains Rob Gerlsbeck of MoneySense. The account holder must repay that amount within 15 years but avoids paying mortgage interest on the sum. Account holders can also withdraw up to $20,000 from an RRSP to finance their own education, with a maximum withdrawal of $10,000 in a single year.Learn more about Financial Planning