How to calculate tax savings from RRSP deduction?

Question

How do you simply determine your tax savings from a RRSP deduction? Do you multiply your deduction amount by your marginal tax rate or effective tax rate? How do you calculate your marginal tax rate?

Answer 1

Figure out your marginal tax rate, then multiply your contribution by that rate.

For example, if you made $150K in Alberta last year, your marginal tax rate is 39%. If you contributed $10K into an RRSP, you would get $3900 back.

If your deduction drops you into another bracket, the math gets tricky (if you made $73K in Alberta, and made the same contribution, since up to $72,757 is 32% and above is 36%, some of your contribution would save you tax in each bracket).

Hope this helps and is not too confusing.