Financial Tool

TFSA vs Non-Registered Account: Which One Should You Use in 2025?

May 07, 2025

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.

How to Use Both Accounts Strategically

In reality, many investors should use both accounts—but for different purposes.

Use your TFSA to hold:

Long-term growth assets
Investments with high return potential
Tax-inefficient income (like interest or foreign dividends)

Use your non-registered account to hold:

Investments that generate capital gains
Canadian dividend stocks (eligible for dividend tax credit)
Assets you may want to sell strategically for tax planning

This way, you get the best of both: tax-free growth where it matters, and flexibility where it’s needed.

Should You Move Investments Between the Two?

You can’t directly transfer investments from a non-registered account to a TFSA without triggering a tax event.

However, if you have room in your TFSA, you can:

Sell the investment in your non-registered account
Pay any applicable taxes
Move the cash into your TFSA and repurchase the same (or different) investment

If you sell at a loss, that loss is not claimable if you move the funds into your TFSA, so timing matters.

Final Thoughts

When comparing a TFSA vs non-registered account, the best choice depends on your current contribution room, your long-term goals, and your tax bracket.

If you still have some room in your TFSA, that should be your first step—it gives you tax-free growth with full flexibility. Once your TFSA is maxed, use a non-registered account to continue building your portfolio without contribution limits.

At Ai Financial, we help clients manage both types of accounts—using TFSAs for tax-efficient growth and non-registered accounts for overflow investing or advanced planning. If you’re not sure how to balance the two, we can help build a strategy that fits your financial goals.

Need help deciding where to invest next? Contact Ai Financial to speak with an advisor and get a personalized investment plan for 2025.