Tax-Free Savings Account (TFSA): Any interest or investment earnings earned inside this type of savings account does not incur tax. So let’s say you earn a salary and pay income tax on that salary, then you put your money in a TFSA. Any money earned inside that account does not get taxed.
Some stocks qualify for TFSA but you’ll have to work with a brokerage firm because your typical bank does not work with stocks.
There are contribution limits for the TFSA that change year to year. In 2020 You can contribute a maximum amount of $6000 per year to a TFSA. Here is the CRA info: TFSA contribution room
Registered Retirement Savings Plan (RRSP): The RRSP is a tax-deferred account so you pay income taxes on the withdrawal. So when you earn the money, you put it into an RRSP account without paying any income tax. Later, when you take money out, then you have to pay income tax.
First-Time home buyers can use their RRSP saving for a down payment on their first home and not pay any income tax on the withdrawal. This government plan is called the Home Buyers Plan (HBP). Here is the CRA info: Home Buyers’ Plan
Under the HBP, first-time home buyers can withdraw up to $35k from their RRSP and not pay any income tax. This money must be used as part of a down payment and the HBP must be paid back into the RRSP over the next 15 years. If you buy a home with your spouse (or other individuals) each of you can withdraw up to $35k as long as you all qualify as first-time buyers.
One thing that trips people up sometimes is that you cannot withdraw money from the RRSP for HBP if the money was deposited less that 90 days ago. So if you are planning to benefit from the HBP, make sure to deposit the money into your RRSP account at least 90 days before you need it.
First-Time Home Buyer Incentive: First-time home buyers may be eligible to get an interest-free loan from the government. The loan is for 5% of the purchase price for an existing home and for up to 10% of the purchase price of a new construction. There are some eligibility criteria: First-Time Home Buyer Incentive
