Choosing the Right Account to Maximize Your Investment Returns

If you’re planning to invest in 2025, one of the most common questions is: Should I put this money in my TFSA or a non-registered account?

The answer depends on your goals, income, and tax strategy. Both accounts have their place—but understanding the key differences can help you build a more efficient portfolio.

This article compares the TFSA vs non-registered account options and helps you decide which one makes the most sense for your next investment.

What’s the Difference Between a TFSA and a Non-Registered Account?

A Tax-Free Savings Account (TFSA) is a registered account that allows Canadians to earn income and growth without paying any tax on it—ever. You can withdraw money at any time, for any reason, tax-free.

A non-registered investment account is not tax-sheltered. That means any income or gains are taxable—but there are fewer rules, no contribution limits, and more flexibility around how you use the account.

Here’s the key difference:

• In a TFSA, the government gives you a tax advantage.
• In a non-registered account, you’re taxed on earnings like interest, dividends, or capital gains.

When a TFSA Is the Better Option

In 2025, the TFSA limit is $7,000, and if you’ve never contributed before, you may have up to $95,000 in available room. For most investors, this is the first place to put your money.

You should prioritize your TFSA if:

• You haven’t maxed it out yet
• You’re investing for long-term growth
• You expect strong gains (capital appreciation, compounding)
• You want to avoid tax on income or withdrawals

The TFSA is especially powerful for holding:

• Mutual funds
• Segregated funds
• Growth-focused investments
  High-interest GICs or bond funds
• U.S. or international funds (to avoid foreign withholding tax)

Drawback: You’re limited by the annual contribution room. And if you over-contribute, penalties apply.

When a Non-Registered Account Makes More Sense

Once your TFSA is maxed out—or if you’re investing a large amount—you may need to use a non-registered account.

This option is ideal when:

• You’ve already contributed the max to your TFSA
• You want to invest more than your available TFSA room
• You need the flexibility to write off capital losses
• You’re using investment loans or leveraged strategies

Non-registered accounts allow for:

• Unlimited contributions
• Tax-loss harvesting (claiming losses against gains)
  Capital gains taxed at only 50%
• Flexibility for advanced strategies

Drawback: You’ll pay tax annually on interest, dividends, and 50% of any capital gains. That can reduce your overall return.

Tax Comparison Example

Let’s say you invest $50,000 and it grows by 6% annually.

• In a TFSA, your gains are 100% tax-free
• In a non-registered account, you’ll owe tax on your earnings each year

Over 10 years, that tax drag can reduce your total return by thousands of dollars.