All the Numbers

The savings accounts at a glance

From the All the Numbers wiki · Savings accounts

Each account has its own rules for how much you can put in, what a contribution saves in tax and what a withdrawal costs. The entries below cover them in full. How spare cash is split between them is set out in where spare cash goes.

TFSA. Money put into a tax-free savings account is not deducted from income, and what it earns and what comes out are not taxed. Room builds each year by the annual limit that CRA publishes, and a withdrawal comes back as room on 1 January of the following year.[1][2] See TFSA contribution room.

RRSP. A contribution is deducted from income in the year it is made, or in a later year. Room builds at 18% of the previous year's earned income, up to a yearly cap.[3][4] Withdrawals are added to income. The Home Buyers' Plan lets you withdraw up to $60,000 for a first home.[5] The RRSP must mature, by being withdrawn, annuitized or converted to a RRIF, by 31 December of the year you turn 71.[6] See RRSP room, deduction and withdrawals and the Home Buyers' Plan.

FHSA. The First Home Savings Account takes up to $8,000 a year, with one year of unused room carried forward, and $40,000 over a lifetime. Contributions are deducted from income, and a withdrawal for a first home is tax-free. Its participation ends on 31 December of the 15th year after it was opened.[7][8][9] See the First Home Savings Account.

RESP. A registered education savings plan is opened for a child. Contributions are capped at $50,000 per child over a lifetime. The Canada Education Savings Grant adds 20% of each contribution, up to $500 of grant a year and $7,200 for the child's life.[10][11][12][13] The growth and the grant are taxed in the student's hands when they are paid out for education.[14] See RESPs and the education grant and RESP withdrawals.

RRIF. A registered retirement income fund is what an RRSP becomes once withdrawals start. Each year it pays a minimum set by age, and that payment is taxed as income.[15] From age 71 the minimum comes from a fixed table, and below that age from a formula.[16] See RRIFs and the wind-up.

Non-registered. Any other investment account has no room and no deduction. Each year it pays out part of its return as interest, dividends and gains, and that income is taxed in the year it is paid.[17] When an investment is sold for more than it cost, 50% of the gain is taxable.[18] See capital gains and the adjusted cost base and expected returns and fees.

See also

  • Auto-allocation · When switched on, money left after spending and your own contributions is placed for you down a priority list — FHSA, then RRSP, then TFSA, then non-registered by default — each account taking what its room allows. Every dollar it moves is shown, by account, on each month and year.
  • Capital gains and the adjusted cost base · Selling an investment for more than its adjusted cost base is a capital gain, and half of it is added to taxable income in the year of the sale. Growth that has not been sold is not taxed.
  • Expected returns and fees · The default return is 6.35% a year, nominal and net of fees, for an 80/20 stock and bond portfolio. It is an expected long-run average, not a forecast, and an account's own rate replaces it.
  • RESPs and the education grant · Contributions attract a 20% government grant, up to $500 a year, and $7,200 for a child's lifetime, up to a $50,000 contribution limit. Growth and grants come out taxed in the student's hands, at a rate that is usually near zero.
  • RRIFs and the wind-up at 71 · An RRSP must become a RRIF by the end of the year you turn 71, after which a prescribed minimum comes out and is taxed every year. Give a birth year and the plan models it; leave it blank and a plan running past 71 looks better than it is.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • Taking money out of an RESP · Your own contributions come back tax-free. The grant and growth leave as education payments taxed to the student. If no one studies, growth is taxed to you with an extra 20%, and the grants are repaid. All the Numbers pays contributions first.
  • TFSA contribution room · Room starts accruing the year you turn 18, not the year you open an account, and it never expires. Withdrawals come back the following January. Limits past 2026 have not been announced, so the plan projects them by the rule the Act sets and says so.
  • The First Home Savings Account · $8,000 a year with one year of carryforward and $40,000 for life, deducted from income and withdrawn tax-free for a first home. The refund is credited the following April, and the account winds up into an RRSP if it is never used.
  • The Home Buyers' Plan · Up to $60,000 out of an RRSP, untaxed, for a first home — but it is a loan to yourself, repaid over fifteen years, and a missed repayment is taxed as income that year.

References

  1. ↑CRA — Tax-Free Savings Account (limits table); 2023-2026 via canada.ca calculate-room page; earlier years · TFSA annual dollar limits 2009-2026 · See the source · effective 2009-01-01
  2. ↑Income Tax Act s.207.01(1), "unused TFSA contribution room", variable B: "the total of all amounts each of which was a distribution made in the preceding calendar year under a TFSA" (other than a qualifying transfer or a specified distribution) · TFSA withdrawals are added back to contribution room at the start of the next calendar year · effective 2009-01-01
  3. ↑CRA — RRSP contribution limit formula (ITA s.1024(1)) · RRSP accrual rate on prior-year earned income · 18% · effective 1991-01-01
  4. ↑CRA MP/RRSP/DPSP/TFSA limits table; 2026 cap $33,810 · RRSP deduction limit formula: 18% of prior-year earned income minus pension adjustment, capped at the 2026 dollar maximum · See the source · effective 2026-01-01
  5. ↑Income Tax Act s. 146.01 · Home Buyers' Plan: the RRSP withdrawal per person per calendar year excluded from income (ITA 146.01(1) "regular eligible amount" (h)); the HBP balance must be nil at 1 January of the withdrawal year (paragraph (i)); raised for withdrawals after 16 April 2024 · $60,000 · effective 2024-04-17
  6. ↑CRA — RRSP options when you turn 71 · An RRSP must mature (be withdrawn, annuitized or converted to a RRIF) by December 31 of the year the annuitant turns 71 · 71 years · effective 2007-01-01
  7. ↑CRA — First Home Savings Account · FHSA: $8,000 annual limit; $40,000 lifetime; unused room carries forward ONE year only (max $16,000 in a single year); non-qualifying withdrawal = ordinary income with RRSP-style withholding; qualifying-home closing deadline = end of year following first withdrawal · See the source · effective 2023-04-01
  8. ↑CRA — Tax deductions for FHSA contributions · FHSA contributions are deductible from income for the contribution year or a future year (RRSP-like); lifetime deduction maximum $40,000; unclaimed deductions carry forward indefinitely; transfers in from an RRSP are NOT deductible · See the source · effective 2023-04-01
  9. ↑CRA — Withdrawals and transfers out of your FHSAs · FHSA maximum participation period ends Dec 31 of the year of the EARLIEST of: 15th anniversary of opening the first FHSA; turning 71; the year following the first qualifying withdrawal. Property left at period end loses FHSA status and its fair market value becomes taxable income unless directly transferred · See the source · effective 2023-04-01
  10. ↑Income Tax Act s.204.9(1), definition "RESP lifetime limit for a year" · RESP lifetime contribution limit per beneficiary · $50,000 · effective 2007-01-01
  11. ↑Canada Education Savings Act s.5 ("20% of the contribution") · Canada Education Savings Grant basic matching rate on RESP contributions · 20% · effective 1998-01-01
  12. ↑Canada Education Savings Act s.5; $1,000 annual ceiling covers one carried-forward year · CESG basic annual maximum per beneficiary (the match on the eligible contribution) · $500 · effective 2007-01-01
  13. ↑Canada Education Savings Act s.5 ("Not more than $7,200... during their lifetime") · CESG lifetime maximum per beneficiary · $7,200 · effective 1998-01-01
  14. ↑Income Tax Act s.146.1(7) · Educational assistance payments (grants + growth) are included in the STUDENT's income, not the subscriber's; contributions come back tax-free · effective 1998-01-01
  15. ↑CRA — RRIF minimum payments; factors cross-checked digit-for-digit across four sources · RRIF minimum withdrawal factors (Budget 2015 schedule): entry age <=71 uses 1/(90-age); table 71-94; 20.00% applies at 95+. Secondary sources commonly typo 86 (8.99, not 9.01) and 89 (10.99, not 11.01) · See the source · effective 2015-01-01
  16. ↑Income Tax Regulations s.7308 · RRIF minimum below age 71 at January 1 is 1/(90 − age) of the January 1 fair market value; the prescribed-factor table applies from 71; 20% from 95 · See the source · effective 2015-01-01
  17. ↑PWL Capital — Financial Planning Assumptions, §8 (composition of returns: distributions by character, the balance as capital gains, 90/10 unrealized/realized) · Every non-registered account pays the default yearly distributions, a twelfth each month on its value, reinvested in the account; its entered return is the total, so the price return is that less the distributions; below the default yield the distributions shrink in proportion to the return, and a return of zero or less pays none. Interest and foreign dividends are fully taxed (no foreign tax credit), Canadian dividends as eligible dividends, realized gains as capital gain distributions · effective 2026-10-12
  18. ↑CRA Guide T4037, Capital Gains 2025 ("The inclusion rate for 2025 is 50%"; 2/3 proposal cancelled per PM release 2025-03-21) · Capital gains inclusion rate (individuals) · 50% · effective 2001-01-01