Tax planning for savers: rates, RRSP timing, TFSA and more

Updated November 2026

You can't avoid tax, but you can control when you pay it and which account your investment income lands in. A few simple decisions can be worth thousands of dollars over a working life.

Marginal vs average tax rate

Canada taxes income in brackets: each slice of income is taxed at its own rate.

Your marginal rate is the combined federal and provincial rate on your next dollar of income. It tells you what a raise, an RRSP deduction or an RRSP withdrawal is worth.
Your average rate is your total tax divided by your total income. It is always lower than your marginal rate, because the first slices are taxed at lower rates.

For 2026 the lowest federal rate is 14% (down from 15% before 2025), on taxable income up to $58,523. Your province or territory adds its own rates and brackets on top, so check your combined rate with your province's figures or a reputable tax calculator.

Example (made-up round numbers): if you pay $9,000 in total tax on $60,000 of income, your average rate is $9,000 ÷ $60,000 = 15%. But if your combined marginal rate is 30%, each extra $1,000 you earn costs $300 in tax – and each $1,000 you deduct saves $300.

Most non-refundable tax credits are calculated at the lowest federal rate, so with that rate at 14% for 2026 most federal credits are now worth 14% of the credit amount.

Timing your RRSP deduction

An RRSP deduction saves tax at your marginal rate. A $5,000 deduction saves about $1,000 at a 20% marginal rate, but about $2,000 at 40%.

You don't have to deduct a contribution in the year you make it. Undeducted contributions carry forward and can be deducted in any later year, up to your deduction limit. If your income is low this year but will rise, you can contribute now (so the money starts growing tax-sheltered) and claim the deduction later.
Your unused contributions show on your Notice of Assessment and in CRA My Account.
The deadline for contributions that count for 2026 is March 1, 2027.
The other half of the RRSP equation is withdrawal: if you expect a lower marginal rate in retirement, the RRSP wins; if not, a TFSA may be better. See How an RRSP saves tax and RRSP, TFSA or FHSA?.

TFSA vs non-registered accounts

Inside a TFSA, interest, dividends and capital gains are never taxed, and withdrawals don't count as income. In an ordinary (non-registered) account:

How investment income is taxed outside registered accounts
Type of income	Tax treatment
Interest (savings, GICs, bonds)	Fully taxed at your marginal rate every year
Dividends from Canadian companies	Taxed, but reduced by the dividend tax credit
Foreign dividends	Fully taxed; no dividend tax credit (and foreign tax may be withheld)
Capital gains	Only one-half of the gain is taxable, and only when you sell

So, for most people, the order is: use TFSA room (and RRSP room if it suits you) before investing in a taxable account. If you do have a taxable account, holding interest-paying investments inside registered accounts and stock investments outside is a common way to reduce tax.

Capital gains: still one-half

The capital gains inclusion rate remains one-half: if you sell shares for $10,000 more than you paid, $5,000 is added to your taxable income. A proposal to raise the rate to two-thirds was cancelled in 2025. Capital losses can offset capital gains in the same year, three years back or any future year. Gains inside RRSPs, RRIFs, TFSAs and FHSAs are not taxed this way.

Dividends and the dividend tax credit

Dividends from Canadian corporations are "grossed up" and then reduced by the federal and provincial dividend tax credit, which recognises that the company already paid tax on its profits. The credit amounts appear on your T3 and T5 slips. The credit only applies outside registered accounts; inside an RRSP or RRIF, every dollar withdrawn is taxed as ordinary income, whatever the source.

Pension income splitting at 65+

Couples can allocate up to 50% of eligible pension income to a spouse or common-law partner by filing Form T1032 with both returns. Pension plan payments qualify at any age; RRIF and annuity payments qualify once the person receiving them is 65 or older at year end. CPP, QPP and OAS cannot be split this way. Splitting can lower the couple's total tax and may help the higher-income spouse stay below the OAS recovery threshold ($95,323 for 2026).

Donating

Gifts to registered charities earn a non-refundable tax credit. The federal credit on the first $200 of donations in a year is calculated at the lowest rate (14% for 2026); amounts above $200 earn a higher rate, generally 29% federally. Provinces add their own credit. Because of the $200 threshold, it can pay to combine a couple's receipts on one return, or to save receipts and claim several years at once (you can carry donations forward up to five years).

Keep good records

Keep tax slips, receipts and RRSP contribution receipts for at least six years after the end of the tax year they relate to.
Track the adjusted cost base of every non-registered investment (your broker's figure may be incomplete if you moved accounts).
Keep records of TFSA and FHSA contributions and withdrawals – the CRA's room figure may not include recent transactions.
Save your Notices of Assessment, which show RRSP room and carry-forwards.

Not tax advice. This page explains general rules. For your situation, use CRA guidance or a qualified tax professional.