RRSP for Self-Employed Individuals: A Smart Way to Save on Taxes in Canada

If you're a freelancer, small business owner, contractor, or have irregular income — managing your finances and taxes each year can be a serious challenge. The good news is: you can legally reduce your tax burden using a powerful tool called the RRSP (Registered Retirement Savings Plan).

Many people think RRSPs are only for salaried employees, but in reality, self-employed individuals can benefit even more by using RRSPs flexibly and strategically.

1. What Is an RRSP and Why Should the Self-Employed Care?

An RRSP is a government-registered retirement savings account that allows you to:

• Contribute income before taxes

• Defer taxes until withdrawal (usually at retirement, when your tax rate is lower)

• Invest in mutual funds, ETFs, GICs, stocks, and more

For self-employed individuals, RRSPs serve as:

• A legal tax-saving strategy

• A way to protect income from unplanned personal spending

• A secure long-term asset for retirement

2. Key Benefits of RRSP for the Self-Employed

✅ Contributions reduce your taxable income

Any contributions to your RRSP can be deducted from your business income. This helps:

• Lower your tax bill for the year

• Keep more money available for reinvestment or saving

Example: If you earn $80,000/year and contribute $15,000 to your RRSP, you’ll only be taxed on $65,000.

✅ Tax deferral until retirement

You don’t pay taxes when contributing. You only pay taxes when you withdraw funds — typically after age 60, when your income (and tax rate) is likely lower.

✅ Spousal RRSP for income splitting

You can open a Spousal RRSP to:

• Reduce taxes for both you and your spouse

• Maximize retirement income for the couple

• Avoid having one partner taxed in a higher bracket

3. RRSP vs TFSA – Which Is Better for Self-Employed People?

RRSP offers immediate tax savings because contributions reduce your taxable income. It’s ideal if you’re currently in a high-income bracket. However, withdrawals are taxed unless done during retirement. For 2024, the RRSP annual limit is 18% of last year’s income, up to $31,560.

TFSA doesn’t reduce taxes upfront, but all investment earnings and withdrawals are completely tax-free, and you can withdraw funds at any time with no penalty. The 2024 TFSA limit is $7,000.

Best strategy: Use both RRSP and TFSA. Prioritize RRSP if your income is high, to get immediate tax savings.

4. How to Set Up an RRSP If You're Self-Employed

1. Determine your net income from the previous year

2. Check your RRSP contribution room (available on your CRA MyAccount)

3. Open an RRSP account through a bank or financial advisor

4. Choose the right investments (GICs, mutual funds, ETFs, etc.)

5. Create a contribution plan — either monthly or around tax season

📌 Important Notes:

• Unused contribution room can carry forward to future years

• Early withdrawals from RRSPs are taxed and may reduce long-term benefits

• The earlier you contribute, the more you benefit from compound interest

✅ How TikiTax Can Help

As a self-employed person, you don’t have an HR or finance team — let TikiTax guide you:

• Choose the best RRSP plan for your business and income

• Open your RRSP account and create a personalized contribution plan

• Maximize tax efficiency so you can focus on growing your business

📞 Talk to a TikiTax advisor today
👉 Book your free consultation atTikiTax.net
👉 Avoid costly mistakes — and save thousands every year