Skip to content
English
  • There are no suggestions because the search field is empty.

Spousal RRSP Withdrawal Rules and Tax Traps

Learn how early withdrawals from a Spousal RRSP are taxed, when attribution rules apply, and how to avoid costly mistakes

Spousal RRSPs are designed to help couples split income in retirement, but sometimes funds are withdrawn earlier than planned. Whether due to unexpected expenses or a change in strategy, it’s important to understand how early withdrawals from a Spousal RRSP are taxed and what traps to avoid.

The key consideration is the attribution rule, which can shift the tax burden back to the contributing spouse, even years after the contribution. Knowing how this rule works helps you make informed decisions and avoid unintended tax consequences.

How Early Withdrawals from a Spousal RRSP Are Taxed

At first glance, withdrawing from a Spousal RRSP might seem similar to taking money from an Individual RRSP. In both cases:

  • The withdrawal amount is fully taxable as income in the year it is withdrawn.

  • A withholding tax is applied at the source, based on the amount withdrawn.

However, with a Spousal RRSP, there’s an extra layer: the attribution rule.

The Attribution Rule: Who Pays Tax on Early Withdrawals?

The attribution rule prevents immediate income shifting between spouses for tax purposes. It works as follows:

Condition Who Pays the Tax? Example
Withdrawal occurs within 3 calendar years of your last contribution to the Spousal RRSP Contributing spouse (withdrawal is added to their taxable income) You contribute in 2025, spouse withdraws in 2026 or 2027 → taxed to you
No contributions made in the 3 preceding calendar years Account holder spouse (intended income-splitting benefit applies) Last contribution in 2020, withdrawal in 2024 → taxed to spouse

If no contributions have been made in the three preceding calendar years, the withdrawal is taxed as your spouse’s income, enabling the intended income-splitting benefit.

Common Pitfalls with Early Spousal RRSP Withdrawals

Misunderstanding how early withdrawals work can lead to avoidable tax problems. Common pitfalls include:

  • Withdrawing too soon after a contribution, triggering attribution and losing the income-splitting benefit.

  • Assuming withholding tax is the final tax owed, leading to underestimating the real tax impact when filing.

  • Not coordinating withdrawals with overall income planning, resulting in higher marginal tax rates.

  • Neglecting to track contribution dates accurately, which can cause costly attribution surprises.

At Optimize, we help you avoid these pitfalls by planning withdrawals with timing, tax brackets, and contribution history in mind.

How Optimize Helps You Manage Spousal RRSP Withdrawals Correctly

At Optimize, we ensure your Spousal RRSP strategy is executed thoughtfully, even when withdrawals are needed earlier than expected. Our support includes:

  • Tracking contribution history and attribution windows, so withdrawals are timed strategically.

  • Forecasting tax impacts of potential withdrawals, avoiding unpleasant surprises at tax time.

  • Advising on alternative funding strategies, such as TFSA withdrawals, when early Spousal RRSP withdrawals would be tax-inefficient.

  • Coordinating withdrawals with your broader income plan, smoothing out tax liabilities across years.

  • Regularly reviewing your Spousal RRSP strategy, ensuring it adapts as your financial needs evolve.

With Optimize, early withdrawals from a Spousal RRSP are managed carefully to minimize tax impacts and preserve the benefits of income splitting.