Tax

What is RRSP?

Registered Retirement Savings Plan — Canadian tax-deferred retirement account; contributions reduce taxable income, growth is tax-free until withdrawal.

An RRSP (Registered Retirement Savings Plan) is a Canadian tax-advantaged retirement account. Contributions are deductible against income in the year made, growth inside the plan is tax-deferred, and withdrawals are taxed as income at the time of withdrawal.

2026 contribution limits

18% of earned income from the prior year
Capped at the annual maximum (~$32,490 for 2026)
Plus any unused contribution room carried forward from prior years

Why earned income matters

RRSP room is generated only by earned income: salary, business income, rental income (in some cases). Dividends do not generate RRSP room.

This is why owner-managers paying themselves entirely in dividends miss a significant tax-deferral mechanism. A founder paying $0 in salary generates $0 in RRSP room — even if they're earning $300K through dividends.

Common owner-manager errors

All-dividend strategies — can leave $50K+ of RRSP room unused per year
Late-life catch-up — trying to accumulate room after age 60 doesn't work without earned income
Spousal RRSPs missed — income-splitting opportunity in retirement

RRSP vs. corporate retained earnings

For some owner-managers, leaving money inside the corporation as retained earnings (taxed at small-business rates) and withdrawing later may beat RRSP. The math depends on personal vs. corporate tax rates, time horizon, and exit strategy. Run both projections before committing to either approach.