Leverage Calculators
RRSP loan gross-up.
See how borrowing to maximise your RRSP contribution creates a multiplier effect: the tax refund pays down the loan, leaving you with a larger RRSP balance for almost no extra out-of-pocket cost.
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Result
Fill the form and press Calculate.
How the RRSP gross-up works
The gross-up formula is straightforward: Gross-up = Cash available / (1 − Marginal tax rate). At a 30% marginal rate, $10,000 grosses up to $14,286: you borrow $4,286 and contribute the full $14,286. The tax refund on the larger contribution (also ~$4,286) pays down the loan, less a small interest cost.
The strategy is most powerful for high-income earners: at a 50% marginal rate the multiplier is 2.0x, doubling your contribution. RRSP loan interest is not tax-deductible (unlike investment loans), so keep the term short.
TNAADO Inc. · Toronto
The gross-up trick, and its one hard limit
An RRSP loan works because the deduction generates a refund, and the refund can then be put back into the RRSP and deducted again. Borrowing enough that the refund repays a large part of the loan converts a modest amount of cash into a much larger contribution, provided you genuinely have the room and you genuinely apply the refund to the loan rather than spending it.
The mistake people make. Expecting to deduct the loan interest. Interest on money borrowed to contribute to an RRSP is specifically not deductible, unlike interest on money borrowed to invest in a non-registered account. That single rule is why the strategy only works when the loan is cleared fast, usually inside a year, and why a multi-year RRSP loan at a high rate is a losing trade no matter how good the refund looked.
Disclaimer
Estimates for educational purposes only. Verify your RRSP contribution room with CRA and consult a licensed advisor before borrowing to invest.