An investment account is not an investment: it is a container. The stocks, ETFs (exchange-traded funds) and other securities you hold are the contents; the account mainly determines how those contents are treated for tax purposes. Two people holding exactly the same securities can face very different tax situations depending on the container they chose.
The main containers in Canada
The TFSA — Tax-Free Savings Account
Contributions are made with money that has already been taxed. In exchange, gains earned inside the account — capital gains, dividends, interest — are normally not taxed, neither while you hold them nor on withdrawal. Contribution room is capped and accumulates each year (see the article on contribution room).
The RRSP — Registered Retirement Savings Plan
The mechanism is reversed: the contribution is as a general rule deductible from taxable income in the year it is made, and it is the withdrawal that is taxed, as income. The idea of the plan is to shift taxation to a period when income — and therefore the tax rate — is usually lower, such as retirement.
The LIRA — Locked-In Retirement Account
A LIRA normally receives amounts coming from a former employer pension plan. Its tax mechanism resembles that of an RRSP, but the funds are locked in: the rules strictly govern when and how they can come out. In Quebec the same account is called a CRI, and it falls under a different authority.
The non-registered account
No tax shelter: capital gains, dividends and interest are taxable in the year they occur, each under its own rules. It is also the only container with no contribution limit.
What this changes for your tracking
In Everyfolio, every portfolio carries an account type. That type feeds the tax context shown in the report: the same gains do not mean the same thing in a TFSA and in a non-registered account. The return calculations themselves are identical from one container to another — what differs is the tax treatment, not the arithmetic.
Challenge: check my understanding
This article’s challenge needs an account: four questions to check what you understood, and a state that stays with you from one visit to the next.
Official sources
The exact rules and amounts are set by the Canada Revenue Agency (CRA) and change from year to year. Quebec residents also file with Revenu Québec, which publishes its own guidance. Check their sites for the figures in force.
- Canada Revenue Agency — TFSA: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account.html
- Canada Revenue Agency — RRSPs and related plans: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans.html
- Revenu Québec — citizens: https://www.revenuquebec.ca/en/citizens/
Informative, general content — not personalized advice. For your situation: your institution or an advisor.