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How much income tax is to be paid for cashing in $30,000 RRSP?

By Gord Ahier |

Lynnette asked:

How much income tax would I have to pay if I cash in $30,000 RRSP? I am working full-time, earning $58,000 per year. I am single.

Gord Ahier answered:

When you withdraw funds from your RRSP, income tax is withheld at source. For withdrawals up to and including $5,000, 10 per cent is withheld; from $5,001 to $15,000, 20 per cent is withheld; and for withdrawals greater than $15,000, 30 per cent is withheld. A common misconception is that this will be the only tax liability as a result of the withdrawal. However, the full amount of the withdrawal is added to your taxable income in the year the withdrawal is made, and depending on your income level you may need to remit additional tax.

If you live in the province of Ontario, are single, earn income of $58,000 and withdraw $30,000 from your RRSP, $9,000 of income tax will be withheld at source for a net receipt of $21,000 with an additional $1,844 due when you file your tax return.

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