Stocks, Bonds etc. -> Investing Tax Issues -> Investments in registered or non-registered accounts?

Which Investments Should be Held in an RRSP/RRIF, TFSA, or Non-Registered Account?

From a tax perspective, where is it best to hold investments which generate the following types of income? In the following analysis, #1 is our first choice, #2 is our second choice, and #3 is our last choice. If you have all accounts - non-registered, TFSA and RRSP/RRIF, it is best to keep the investments that attract the highest tax rates inside your TFSA or RRSP/RRIF, and those that attract the lowest rates (Canadian dividends and capital gains) in a non-registered account.

	Capital gains non-registered (tax on 50% of gain) or TFSA (no tax on gain) RRSP/RRIF (tax on 100% of gain when withdrawn)
	Interest RRSP/RRIF or TFSA non-registered
	Return of capital combined with Canadian eligible dividends non-registered TFSA or RRSP/RRIF
	Return of capital combined with interest or foreign dividends TFSA or RRSP/RRIF due to reduced record-keeping requirements non-registered
	Canadian eligible dividends non-registered, to take advantage of the dividend tax credit RRSP/RRIF or TFSA
	Canadian non-eligible dividends non-registered, to take advantage of the non-eligible dividend tax credit RRSP/RRIF or TFSA (when eligible for these accounts)
	Dividends from US corporations RRSP/RRIF because no dividend tax credit, and no withholding tax non-registered, because all or part of the 15% withholding tax can be recovered through the foreign tax credit TFSA - there will be withholding tax that cannot be recovered
	Other foreign dividends RRSP/RRIF, when the dividends are from a country that does not deduct withholding tax from dividends paid into the RRSP/RRIF non-registered, because all or part of the withholding tax can be recovered through the foreign tax credit TFSA - there will be withholding tax that cannot be recovered

From a tax perspective, where is it best to hold the following types of investments?

	Bonds - interest-paying and non-interest paying (strip bonds) RRSP/RRIF or TFSA, because then no special recordkeeping is required, and not tax-efficient in a non-registered account
	Treasury bills (T-bills) RRSP/RRIF or TFSA - not tax efficient in a non-registered account

Shares in corporations

	Shares in Canadian corporations non-registered to get eligible dividend tax credit RRSP/RRIF or TFSA
	Shares in US corporations RRSP/RRIF because no dividend tax credit, and no withholding tax on dividends in the RRSP non-registered, because all or part of the withholding tax can be recovered through the foreign tax credit TFSA - there will be 15% withholding tax on dividends, that cannot be recovered
	Shares in other foreign corporations RRSP/RRIF, when the dividends are from a country that does not deduct withholding tax from dividends paid into the RRSP/RRIF non-registered, because all or part of the withholding tax can be recovered through the foreign tax credit TFSA - there will be withholding tax on dividends, that cannot be recovered

Call options

RRSP/RRIF or TFSA
non-registered

Put options

only allowed in non-registered

Income trusts, mutual funds and exchange-traded funds (ETFs)

RRSP/RRIF or TFSA, if the distributions are mostly other income (usually interest or foreign dividends) from which no withholding tax is deducted.
non-registered, if the distributions are (a) mostly Canadian eligible dividends, capital gains, or return of capital, or (b) from a foreign source from which withholding tax is deducted. Remember that there may be additional recordkeeping needed for these investments.
TFSA, if the distributions are from a foreign source from which withholding tax is deducted.

	Flow-through shares non-registered account
	Term deposits, guaranteed income certificates RRSP/RRIF or TFSA

TaxTips.ca Resources

Foreign Tax Credit

Tax treatment of investments

Which investments should be held inside vs outside the RRSP?

Recommend stocks/ETFs

Historical Investment Returns on Stocks, Bonds, T-Bills

Revised: October 26, 2023