RRSP vs IPP 2025 — Which Is Better For High-income Owners With Mackisen Cpa Auditors Montreal

In 2025, Canadian professionals and incorporated business owners face one of the most important retirement questions: should they contribute to a Registered Retirement Savings Plan (RRSP) or establish an Individual Pension Plan (IPP)? With evolving CRA rules, rising income thresholds, and increased demand for corporate pension integration, the right choice can mean tens of thousands in lifetime tax savings. Mackisen CPA Auditors Montreal helps business owners compare, design, and implement RRSP and IPP strategies tailored to their age, income, and corporate structure to ensure tax efficiency and long-term financial security.

Legal and Regulatory Framework

Income Tax Act (Canada) Section 146(1): Establishes RRSP contribution limits and tax-deductibility rules for individual investors.
Section 147.1(1): Defines and regulates IPPs as registered defined-benefit pension plans for incorporated owners and key employees.
Section 147.2(2): Sets funding and contribution limits for IPPs, requiring actuarial valuation and CRA registration.
Section 60(l): Permits deduction of RRSP or IPP contributions in computing taxable income.
Section 18(1)(a): Allows corporations to deduct IPP contributions made on behalf of employee-shareholders if reasonable.
Section 8503 ITA Regulations: Governs IPP benefit formulas and integration with CPP benefits.
Taxation Act (Quebec): Recognizes both RRSPs and IPPs but requires separate reporting to Revenu Québec for IPP registration and corporate deductions. Mackisen manages both CRA and Revenu Québec filings for full compliance.

Key Court Decisions

Carter v. The Queen (2012): Affirmed that IPPs established for bona fide retirement purposes are deductible corporate expenses.
Klotz v. The Queen (2004): Confirmed that CRA can deny IPP deductions if the plan lacks legitimate pension intent or exceeds reasonable contribution levels.
Fink v. The Queen (2020): Reinforced CRA’s authority to recapture RRSP deductions when contribution limits are exceeded.
Perron v. The Queen (2016): Established that late RRSP withdrawals remain fully taxable, highlighting the importance of contribution timing.

Why CRA Targets RRSPs and IPPs

CRA audits high-income taxpayers who use IPPs to defer excessive income or RRSPs to shelter beyond legal limits. Common triggers include RRSP over-contributions, IPPs funded above actuarial requirements, or IPPs established without employee-service history. CRA also reviews whether IPP payments align with real retirement objectives and whether RRSP withdrawals are accurately reported. Mackisen pre-emptively audits client plans internally to ensure they meet ITA and CRA standards, preventing penalties and reassessments.

Mackisen’s Strategy

1. Client Profile Analysis — We evaluate income level, age, and corporation status to determine the best fit between RRSP and IPP.

2. RRSP Optimization — For younger owners, we maximize annual RRSP contributions ($31,560 for 2025) and integrate with TFSAs to achieve tax-free growth.

3. IPP Design and Registration — For older, incorporated professionals, we design IPPs offering larger tax-deductible contributions (often 2–3 times RRSP limits after age 45).

4. Corporate Integration — Align IPP funding with retained earnings strategy, ensuring all contributions are deductible under Section 18(1)(a).

5. Actuarial Compliance — Work with licensed actuaries to ensure IPP valuations meet CRA’s funding and pension-adjustment reporting standards.

6. Retirement Withdrawal Coordination — Plan combined RRSP, IPP, and corporate withdrawals to avoid OAS clawbacks and minimize personal tax.

7. Quebec Coordination — Manage IPP registration and deduction filings with both CRA and Revenu Québec to prevent mismatch audits.

Real Client Experience

A Montreal dentist, age 52, incorporated with annual income of $350,000, replaced his RRSP with an IPP designed by Mackisen. His corporation deducted $78,000 annually—three times the RRSP limit—fully compliant and tax-deferred. A Quebec engineer nearing retirement had over-contributed to RRSPs and faced reassessment. Mackisen reorganized his IPP contributions and transferred eligible RRSP funds into the IPP, eliminating penalties and improving pension security.

Common Questions

Which is better for me, RRSP or IPP? Generally, RRSPs suit younger professionals, while IPPs benefit older, high-income owners due to higher allowable contributions.
Can I have both RRSP and IPP? Yes, but contributions to one reduce the limit of the other; Mackisen calculates optimal allocation.
Is IPP income guaranteed? Yes, IPPs are defined-benefit pensions with predictable retirement payouts based on years of service and earnings.
What happens if my corporation stops contributing? IPPs can be frozen or transferred to locked-in plans; we manage transitions seamlessly.

Why Mackisen

Mackisen CPA Auditors Montreal are Canada’s experts in RRSP and IPP integration for professionals and business owners. Our CPAs, actuaries, and tax lawyers ensure compliance with CRA and Quebec pension regulations, maximizing deductions and retirement income. We design personalized plans that grow your wealth, reduce tax, and guarantee long-term stability. Call Mackisen CPA Auditors Montreal today for your 2025 RRSP vs IPP Consultation. The first meeting is free and crafted to help you retire smarter and tax-free.