02/16/2015 09:32 EST | Updated 04/18/2015 05:59 EDT

Contribution limits for RRSPs vs. TFSAs

TORONTO - Canadians looking to make a contribution to an RRSP or a TFSA should be aware of contribution limits and tax implications upon withdrawal.


— You may contribute up to 18 per cent of your income up to a maximum of $24,930 in 2015. Unused contribution room can be carried over from year to year.

— The amount contributed to an RRSP is be deducted from your income, reducing the amount of tax you pay that year.

— If you withdraw from an RRSP account at any age, your financial institution will deduct a withhold tax that will be paid to the Canada Revenue Agency on your behalf.

— The withdrawals count towards your annual income for that year and are taxed as income.

— At age 71, Canadians have to decide whether they want to close their RRSPs and withdraw the money, which will count towards income and be subject to tax, or convert the plan into a registered retirement income fund (RRIF) and be subject to a minimum withdrawal each year.



— You can contribute up to $5,500 into a tax-free saving account this year. From 2009 to 2012, the contribution limit was up to $5,000. This amount was increased in 2013 to $5,500 a year.

— Unused contribution room can be carried over each year, so anyone over 18 years old as of 2009, who has not invested any money into a TFSA will be permitted $36,500 of contribution room in 2015.

— Withdrawals can be repaid in the following year, if the contributor has already hit their limit for that year or be subject to a penalty.

— Withdrawals from a TFSA, including any investment gains, are tax free.

Source: Canada Revenue Agency