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It’s hard to go a day without thinking about the COVID-19 virus and its impact on our lives. Most governments, including ours, have provided significant financial support to those most affected. In this regard, the Canadian federal government has announced some income tax relief, which are summarized below.

Go back to May 2020 Newsletter

Funds invested in either a registered retirement savings account (RRSP) and a tax-free savings account (TFSA) grow tax-free while in the account.

However, there is a difference between the accounts in terms of contributions and withdrawals.

Assuming you have sufficient contribution room, contributions to an RRSP are deducted from your income and therefore save you tax in the current year. Contributions to a TFSA are not deducted and therefore come out of your after-tax income.

Conversely, withdrawals from an RRSP are included in your income, whereas withdrawals from a TFSA are not included in your income.