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Tax-Free Savings Account
Retirement Savings Plan
TFSA vs. RSP
What is a TFSA?
A Tax-Free Savings Account (TFSA) is a registered savings plan registered with the Canada Revenue Agency (CRA). You can save or invest up to $6,0001 a year in a TFSA.
Through a TFSA, you can put your savings into eligible investments, such as mutual funds, GICs, stocks and bonds.
You’re not taxed on the income you earn, so it’s a great way to save for short- or long-term goals because it lets your savings grow tax-free.
How much can I contribute?
- The TFSA contribution limit for 2019 is $6,0001. Annual contribution limit from 2016 to 2018 was $5,500. Annual contribution limit for 2015 was $10,000. Annual contribution limit from 2013 to 2014 was $5,500. Annual contribution limit from 2009 to 2012 was $5,000.
- Any unused contribution room is carried forward from previous years. For example, if you’ve never contributed to a TFSA before, you can contribute up to $63,500 in 2019.
What is an RSP?
A registered Retirement Savings Plan (RSP) is a savings plan that is registered with the Canadian government. Contributions to your RSP reduce your taxable income, which allows you to pay less tax now and potentially build a larger retirement fund for the future. You only pay tax on the amount you withdraw. Contributions can only be made by individuals with “earned income” that is taxable in Canada. You can also contribute to an RSP in the name of your spouse or common-law partner.
Using an RSP to buy a home
- The RSP Home Buyers' Plan (HBP) lets a first time buyer withdraw up to $25,000 from their RSPs for a home purchase1.
- The withdrawn amount must be repaid to your RSP within 15 years, subject to a minimum annual repayment that is 1/15 of the amount withdrawn.
- If the full $25,000 is withdrawn, the minimum annual repayment is $1,667. If less than the minimum is repaid in any particular year, the balance is added to the taxpayer's income.
- For more information, check the Canada Revenue Agency Publication.
Using an RSP to pay for education
- The Lifelong Learning Plan (LLP) allows you to withdraw amounts from your RSP to finance eligible training or education for you, your spouse or your common-law partner.1
- You do not have to include the withdrawn amount in your income and there is no withholding tax on these amounts. You may withdraw up to $10,000 each year under this program for qualified education expenses. The maximum lifetime withdrawal amount is $20,000 over a period of no more than four years.
- These withdrawals must be repaid to your RSP over a period of no more than 10 years.
Any amount that you do not repay when it is due will be included in your income for the year it was due.
- For more information, check out the Canada Revenue Agency publication.
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