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What are TFSA and RRSP in Canada?
25 Mar 2021
Description

TFSA

A Tax-Free Savings Account (TFSA) is a registered savings product that allows taxpayers to earn investment income tax-free.

TFSAs were first introduced in Canada in 2009, and are available at most Canadian financial institutions. A Tax-Free Saving Account allows any Canadian over the age of 18 to save or invest money without paying taxes on the gains made inside the account.

$6,000 can be contributed in 2020, and the unused contribution room can be carried forward. All TFSA contributions made during the year, including the replacement or re-contribution of withdrawals made from a TFSA, will count against your contribution room.

RRSP 
A Registered Retirement Savings Plan (RRSP) is an investment plan for retirement purposes registered with the government. You can contribute to your RRSP account up to a limit every year, and you can invest your money into stocks and mutual funds.

The RRSP contribution limit in 2020 is $27,230 or 18% of last year’s income, whichever is less, plus any unused contribution room from previous years. The contributions are deductible from the taxable income, therefore, contributing to the RRSP can significantly increase your tax refund.

If you don’t contribute the maximum allowable amount to your RRSP in any given year, you can carry forward your contribution room to future years, so you can contribute later.

Tags
finance payroll RRSP Salary tax TFSA
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