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A TFSA shelters the whole return: price growth, dividends, and interest. A taxable account can defer tax only on price growth you have not sold. Dividends, interest, and fund distributions are taxed in the year you receive them, and that tax never compounds. This shows both.

Leave “taxed each year” at 0% and the return is all unrealized price growth. Raise it for the part that is interest or foreign income, taxed at your full marginal rate in the year it is earned. Canadian dividends are taxed every year too, but the dividend tax credit makes that bill smaller than interest, and this page does not calculate the credit.

Withdrawals

What you want to spend from this account. Leave the amount at $0 and nothing is taken out. The figure is what you keep after capital gains tax — the account sells a bit more than that whenever part of the sale is growth.

Taxable account vs. the same return in a TFSA

Same contributions, same total return. The TFSA keeps all of it. The taxable account pays tax each year on the share marked as income, and capital gains tax when the rest is sold or withdrawn.

Two taxes, on purpose. The share marked “taxed each year” is treated as interest or foreign income: your full marginal rate, paid out of the account, with the after-tax amount reinvested. Canadian eligible dividends are taxed every year as well, but the gross-up and dividend tax credit make that rate lower than interest, and sometimes much lower. This page does not calculate that credit. Everything else is unrealized price growth: nothing is taxed until you sell or withdraw, and then only half the gain is included. The starting balance is treated as money you already paid tax on. A withdrawal is a sale sized so the capital gains tax comes out of the proceeds. That spending amount stays flat — it does not rise with inflation — and contributions can keep going or stop. A sale below your cost does not produce a refund here, and that loss is not carried forward to reduce tax on a later gain.

When a taxable account is still the right call

Once TFSA and RRSP room are both used up, a taxable account is often the only place left to keep saving — and that's a genuinely fine outcome, not a consolation prize. The comparison above isn't an argument against taxable investing; it's what the real cost of not having shelter left looks like, so it's not a surprise later.

Want your real contribution room tracked automatically, so you know exactly when this applies to you?

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Not sure which account to prioritize first? TFSA or RRSP — a real answer →