TFSA vs Non-Registered Calculator
Compare investing in a Tax-Free Savings Account versus a regular taxable account. See exactly how much more you keep when your investments grow tax-free.
Income type affects how the non-registered account is taxed. TFSA investments are always tax-free.
| Year | Contributed | TFSA Value | Non-Reg Value | Advantage |
|---|
Why the gap widens over time: In a non-registered account, taxes paid on investment income each year reduce the amount available to compound. Over 20 years, you lose not just the tax itself, but also the growth that money would have earned. This "tax drag" accelerates as your balance grows.
Note: This calculator uses simplified assumptions for illustration. Non-registered taxation depends on the type of income (interest, dividends, capital gains), timing of realizations, and your marginal tax rate each year. Capital gains tax applies only when you sell; this model assumes annual realization for comparison purposes. For personalized tax planning, contact Hart Accounting Services.
How to Use This Calculator
This calculator compares the after-tax value of investing in a TFSA versus a non-registered (taxable) investment account over time. Both accounts start with the same money and earn the same returns, but the tax treatment is very different.
Entering Your Investment Details
Enter your initial investment. This is the lump sum you plan to invest today. The calculator assumes the same amount goes into both the TFSA and the non-registered account for comparison purposes.
Enter your annual contribution. This is the amount you plan to add each year. For TFSA purposes, keep in mind the annual contribution limit is $7,000 for 2025. The calculator does not enforce this limit, allowing you to model various scenarios.
Select your investment period. Choose how many years you plan to invest before withdrawing. Longer time periods show more dramatic differences because the tax drag on the non-registered account compounds over time.
Setting Return and Tax Assumptions
Select your expected return. This is the average annual return you expect from your investments. Conservative portfolios might earn 4-5%, balanced portfolios 6-7%, and aggressive growth portfolios 8-10%. The same return is used for both accounts.
Select your marginal tax rate. This is your highest tax bracket and determines how much tax you pay on investment income in the non-registered account. Higher tax rates increase the advantage of the TFSA.
Select your investment income type. This is important because different types of investment income are taxed differently in Canada.
Understanding How Different Income Types Are Taxed
Interest income from GICs, bonds, and savings accounts is fully taxable at your marginal rate. If you are in the 30% bracket, you pay 30% tax on all interest earned.
Eligible dividends from Canadian corporations receive preferential tax treatment. The dividend is “grossed up” by 38% and then you receive a tax credit that partially offsets the tax. The effective tax rate on eligible dividends is roughly 70% of your marginal rate.
Capital gains from selling stocks or other investments are only 50% taxable. If you are in the 30% bracket, you pay an effective 15% tax on capital gains. Note that capital gains tax is only triggered when you sell. This calculator assumes annual realization for comparison purposes.
Mixed portfolio assumes a blend of all three income types, resulting in an effective rate of approximately 65% of your marginal rate.
Reading the Tax Rate Cards
The three cards at the top of the results show the effective tax rate for each income type based on your marginal rate. The card matching your selected income type is highlighted. This helps you understand why some investments benefit more from TFSA sheltering than others.
Interest income benefits the most from being in a TFSA because it faces the highest tax rate outside. Capital gains benefit the least because they already receive preferential tax treatment. Dividends fall in between.
Understanding the Comparison Cards
The side-by-side cards show the full breakdown for each account type.
For the TFSA, you see your initial investment, total contributions, investment growth, zero taxes paid, and the final value. Everything in the TFSA is yours to keep and withdraw tax-free.
For the non-registered account, you see the same initial investment and contributions, but the investment growth is lower because taxes are paid each year. The “Taxes Paid” row shows the total tax cost over the investment period. The final value is what remains after all taxes.
The Tax Drag Breakdown
The red box labeled “The Tax Drag on Non-Registered Accounts” breaks down exactly where your money went.
Gross Growth shows what your investments would have earned without any taxation (the same as the TFSA). Taxes Lost shows the total dollars paid to the CRA over the investment period. Effective Tax shows the overall tax rate on your investment growth. Lost Compounding shows the opportunity cost of the money that was paid in taxes and therefore could not continue growing.
This lost compounding is the hidden cost of taxable accounts. When you pay $1,000 in tax in year five, you also lose all the growth that $1,000 would have generated from year six onward.
The Growth Chart
The chart shows three lines over time. The green line is your TFSA balance, growing steadily with no tax drag. The orange line is your non-registered balance after taxes, growing more slowly. The gray dashed line is your total contributions, showing the baseline of money you put in.
The widening gap between the green and orange lines illustrates how the tax drag compounds over time. The difference starts small and accelerates as balances grow larger.
The Year-by-Year Table
The table shows your TFSA value, non-registered value, and the TFSA advantage for each year (or at regular intervals for longer periods). Use this to see exactly when the gap reaches various milestones.
Factors That Maximize the TFSA Advantage
The TFSA advantage is largest when your marginal tax rate is higher, your investment income is interest rather than capital gains, your investment returns are higher, and your time horizon is longer.
For someone in a 50% tax bracket investing in interest-bearing investments for 30 years, the TFSA advantage can represent more than half of the non-registered account’s final value.
Factors That Minimize the TFSA Advantage
The TFSA advantage is smaller when your marginal tax rate is lower, your investment income is capital gains, your returns are lower, and your time horizon is shorter.
Even in the most favorable case for non-registered accounts (low tax rate, capital gains, short horizon), the TFSA still provides an advantage because any tax sheltering that compounds is beneficial.
Practical Considerations
The TFSA has contribution limits. If you have more to invest than your available room, you may need to use both a TFSA and a non-registered account. In that case, prioritize sheltering the investments that face the highest tax rates (interest income) in your TFSA.
Capital gains in a non-registered account are only taxed when you sell. If you buy and hold for decades without selling, the actual tax may be deferred. This calculator assumes annual realization for comparison purposes, which overstates the tax drag for buy-and-hold capital gains strategies.
Non-registered accounts have one advantage: capital losses can be used to offset capital gains for tax purposes. In a TFSA, losses provide no tax benefit.
Disclaimer
This calculator provides estimates for illustrative purposes based on the assumptions you enter. Actual investment returns are not guaranteed and will vary. The calculations assume a constant annual return and annual taxation of investment income.
The taxation of non-registered investment income is simplified in this model. Actual taxation depends on your specific tax situation, the timing of buying and selling, the type of dividends received (eligible vs non-eligible), and whether capital losses are available to offset gains.
The effective tax rate on eligible dividends is an approximation and varies by province. The dividend gross-up and tax credit mechanism creates different effective rates depending on your total income and province of residence.
This tool is intended for educational and planning purposes. It does not constitute investment or tax advice. For personalized guidance on investment account selection and tax optimization, please contact Hart Accounting Services.