Glossary of Canadian tax and registered account terms

Annual dollar limit

In plain English: The maximum amount CRA lets you add to your TFSA each year. For 2026, it's $7,000.

Technically: The annual dollar limit is the CRA-prescribed yearly TFSA contribution cap, indexed to inflation and rounded to the nearest $500. The 2026 limit is $7,000. This amount is added to each eligible individual's contribution room on January 1 each year, beginning the year they turn 18 and are a Canadian resident.

Examples

• On January 1, 2026, every eligible adult receives $7,000 in new TFSA room on top of any unused carry-forward.
• The annual limit was $5,000 from 2009–2012, $5,500 from 2013–2014, $10,000 in 2015, and has been $6,000–$7,000 since.

Source: MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and YAMPE — CRA · Tax-Free Savings Account (TFSA) — CRA · Registered Retirement Savings Plan (RRSP) — CRA

Attribution rule

In plain English: If you give or lend money to your spouse or minor child to invest, the tax on that income gets charged back to you, not them. It prevents shifting income to a lower-taxed family member.

Technically: Under ITA Sections 74.1 and 74.2, if a taxpayer transfers or lends property to a spouse or common-law partner, both the income and capital gains are attributed back to the transferor. For transfers to a related minor, income (interest, dividends) is attributed back, but capital gains are not. These rules prevent income-splitting through non-arm's-length transfers.

Examples

• You give your spouse $50,000 to invest. The $2,000 in interest earned is taxed on your return, not your spouse's, due to attribution.
• You give your 15-year-old child $10,000 to invest in stocks. The $300 in dividends is attributed back to you, but if they sell the shares for a $500 capital gain, that gain is taxed in the child's hands.

Source: Registered Retirement Savings Plan (RRSP) — CRA · Tax-Free Savings Account (TFSA) — CRA

Average tax rate

In plain English: The overall percentage of your total income that actually goes to tax. It's usually lower than your marginal rate because your first dollars are taxed at lower brackets.

Technically: Total tax liability divided by total gross income, expressed as a percentage. Unlike the marginal rate, the average rate reflects the blended effect of all applicable brackets on the taxpayer's entire income, producing a lower figure because initial income is taxed at the lowest rates.

Examples

• You earn $80,000 and owe $14,400 in total federal + provincial tax. Your average tax rate is $14,400 ÷ $80,000 = 18%, even though your marginal rate is about 29.65%.
• Someone earning $50,000 who pays $7,500 total tax has an average rate of 15%.

Source: Tax rates and income brackets for individuals — CRA

Basic personal amount

In plain English: The amount of income every Canadian can earn before paying any federal tax. In 2026, it's up to $16,452.

Technically: The basic personal amount (BPA) is a non-refundable tax credit that exempts a base amount of income from federal tax. For 2026, the maximum BPA is $16,452, phasing out on a linear basis for net income between $181,440 and $258,482 to a minimum of $14,829. The credit is computed at the 15% lowest federal rate.

Examples

• If you earn $50,000 in 2026, the BPA credit shelters your first $16,452 from federal tax, saving you $2,468 (15% × $16,452).
• At $220,000 income (midway through the phase-out), your BPA is reduced below $16,452. Above $258,482, your BPA is the minimum $14,829.

Source: Tax rates and income brackets for individuals — CRA · Indexation adjustment for personal income tax and benefit amounts — CRA

Canada Child Benefit

In plain English: A tax-free monthly payment from the government to help families with the cost of raising kids. The amount depends on your income and how many children you have.

Technically: The Canada Child Benefit (CCB) is a tax-free monthly payment administered by CRA for families with children under 18. For the 2026 benefit year, the maximum is $8,157/year per child under 6 and $6,883/year per child aged 6–17. Benefits are income-tested and begin to be clawed back when adjusted family net income exceeds $38,237.

Examples

• A family with one child under 6 and family income of $35,000 receives the full $8,157/year ($679.75/month) tax-free.
• At $80,000 family income, the CCB for one child under 6 is reduced from the maximum due to the clawback above the $38,237 threshold.

Source: Canada child benefit — CRA

Capital gain

In plain English: The profit you make when you sell an investment for more than you paid. In Canada, only half of the gain is taxed.

Technically: A capital gain arises when a capital property is disposed of for proceeds exceeding its adjusted cost base (ACB) plus outlays and expenses. Under the current inclusion rate, 50% of the gain is added to taxable income and taxed at the individual's marginal rate. Capital losses can offset capital gains but not other income.

Examples

• You buy shares for $10,000 and sell for $16,000. Your capital gain is $6,000, of which $3,000 (50%) is added to taxable income. At a 30% marginal rate, you owe $900.
• You sell your principal residence at a gain — it's exempt from capital gains tax under the principal residence exemption.

Source: Line 12700 – Capital gains — CRA

Carry-forward

In plain English: If you don't use all your contribution room this year, it doesn't disappear — it rolls over and adds to next year's room indefinitely.

Technically: Carry-forward refers to unused registered-account contribution room that accumulates indefinitely. For TFSAs, unused annual dollar limits carry forward without expiry. For RRSPs, unused deduction room similarly accumulates. This allows taxpayers to make larger contributions in future years when they have more funds available.

Examples

• You only contribute $3,000 to your TFSA in 2026 (limit $7,000). The unused $4,000 carries forward, giving you $11,000 of room in 2027.
• You had $15,000 of unused RRSP room from prior years. Combined with $16,200 of new room, you can contribute up to $31,200 this year.

Source: How to calculate your TFSA contribution room — CRA · Registered Retirement Savings Plan (RRSP) — CRA

Combined tax rate

In plain English: Your federal tax rate and provincial tax rate added together into one number. This is the actual percentage of tax on your next dollar of income.

Technically: The aggregate of the applicable federal and provincial/territorial marginal tax rates for a given level of taxable income. It represents the total statutory rate applied to the next dollar earned, combining both levels of government.

Examples

• In Ontario, the federal rate of 20.5% plus the provincial rate of 9.15% gives a combined marginal rate of 29.65% for income between $57,375 and $106,717 in 2026.
• An Alberta resident in the lowest bracket has a combined rate of about 25% (15% federal + 10% provincial).

Source: Tax rates and income brackets for individuals — CRA

Contribution room

In plain English: The total amount of space you have to put money into a registered account like a TFSA or RRSP. Unused room carries forward, so it builds up over the years.

Technically: Contribution room is the cumulative space available to contribute to a registered account. For TFSAs, it accumulates from the annual dollar limit plus restored withdrawals plus unused carry-forward. For RRSPs, it is 18% of prior-year earned income (up to the dollar limit) plus unused room minus pension adjustments. Both are tracked by CRA on the Notice of Assessment.

Examples

• You've been eligible for a TFSA since 2009 and never contributed. In 2026, your total TFSA contribution room is $109,000.
• Your RRSP deduction limit is $20,000 but you only contributed $12,000. The remaining $8,000 carries forward to next year.

Source: How to calculate your TFSA contribution room — CRA · MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and YAMPE — CRA · Registered Retirement Savings Plan (RRSP) — CRA

CRA My Account

In plain English: CRA's secure website where you can check your tax info, see your TFSA and RRSP room, track your refund, and update your personal details.

Technically: CRA My Account is a secure digital portal providing centralized access to an individual's tax data, including Notices of Assessment, RRSP deduction limit, TFSA contribution room, benefit eligibility and payment status, and the ability to file adjustment requests or authorize representatives.

Examples

• You log in to CRA My Account after filing to confirm your 2026 TFSA contribution room is $7,000 plus any carry-forward.
• You use My Account to check that your RRSP deduction limit is $32,490 before making a contribution.

Source: CRA My Account for individuals

Deduction limit

In plain English: The maximum amount you can contribute to your RRSP and deduct from your taxes. It's 18% of last year's income, up to a yearly cap set by CRA.

Technically: The RRSP deduction limit is calculated as 18% of the prior year's earned income, up to the annual dollar maximum, minus any pension adjustment, plus unused carry-forward room. The 2026 RRSP dollar limit is $33,810, applied to 18% of your 2025 earned income; the 2025 limit was $32,490. Income earned in 2026 creates new room for 2027, subject to the 2027 dollar limit CRA publishes. The limit is confirmed on the Notice of Assessment.

Examples

• You earned $100,000 in 2025. Your new 2026 RRSP room is 18% × $100,000 = $18,000, well under the $33,810 cap.
• You earned $200,000 in 2025. 18% = $36,000, but the cap limits you to $33,810 in new room for 2026.

Source: Registered Retirement Savings Plan (RRSP) — CRA · MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and YAMPE — CRA · CRA My Account for individuals

Earned income

In plain English: The income CRA uses to calculate how much RRSP room you get. It mainly includes employment income and self-employment income, but not investment income.

Technically: Earned income is the mathematical basis for computing the RRSP deduction limit. It primarily includes employment income (T4 Box 14), net self-employment income, rental income, and certain other amounts, less specific deductions. It is established by the Notice of Assessment and is used in the formula: RRSP room = 18% of prior-year earned income, up to the annual dollar limit.

Examples

• You earned $90,000 in employment income in 2025. Your 2026 RRSP deduction limit from this is 18% × $90,000 = $16,200.
• $50,000 in dividends doesn't count as earned income — it generates zero RRSP room.

Source: Registered Retirement Savings Plan (RRSP) — CRA · MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and YAMPE — CRA

Eligible dividend

In plain English: A type of dividend from larger Canadian companies that gets special tax treatment. You pay less tax on it than on regular income thanks to a gross-up and tax credit system.

Technically: An eligible dividend is paid by Canadian corporations taxed at the general corporate rate. It receives a 38% gross-up and a federal dividend tax credit of 15.0198% of the grossed-up amount, resulting in preferential effective tax rates compared to ordinary income. The gross-up and credit mechanism integrates corporate and personal tax to reduce double taxation.

Examples

• You receive $1,000 in eligible dividends. You gross it up by 38% to $1,380 on your return, then claim a federal dividend tax credit of about $207, resulting in less net tax than $1,000 of employment income.
• In a low tax bracket, eligible dividends can have an effective tax rate near 0% due to the dividend tax credit.

Source: Income tax package (T1 General) — CRA · Tax rates and income brackets for individuals — CRA

Fair market value

In plain English: What something would sell for on the open market between a willing buyer and seller. CRA uses this to figure out the value of assets for tax purposes.

Technically: Fair market value (FMV) is the highest price obtainable in an open, unrestricted market between informed, willing parties under no compulsion. CRA uses FMV to determine deemed disposition proceeds, contribution values for registered accounts, and the value of donated property. FMV is critical for calculating capital gains, TFSA contribution amounts, and estate tax on death.

Examples

• You contribute shares with a FMV of $5,000 to your TFSA. That $5,000 counts against your contribution room, regardless of what you originally paid for the shares.
• You transfer a rental property worth $400,000 FMV to your spouse — the deemed disposition at FMV triggers a capital gain on the difference from your original cost.

Source: Tax-Free Savings Account (TFSA) — CRA · Registered Retirement Savings Plan (RRSP) — CRA

First-time home buyer

In plain English: For tax purposes, you're a first-time buyer if you (and your spouse) haven't owned a home you lived in during the current year or the 4 years before that.

Technically: A first-time home buyer is defined as an individual who did not own a property that was their principal residence (or whose spouse/common-law partner did not) at any time in the current calendar year or the four preceding calendar years. This definition applies to eligibility for the FHSA, the Home Buyers' Plan, and the First-Time Home Buyers' Tax Credit.

Examples

• You sold your condo in 2020. By 2025, four full years have passed, so you qualify as a first-time home buyer again in 2026.
• You've always rented. You and your spouse both qualify as first-time home buyers and can each use the HBP and open FHSAs.

Source: Opening your FHSAs: who can open an account — CRA · What is the Home Buyers’ Plan (HBP)? — CRA

GIS clawback

In plain English: The Guaranteed Income Supplement is extra money for low-income seniors, but almost any other income you earn reduces it aggressively — dollar for dollar in some cases.

Technically: The Guaranteed Income Supplement (GIS) provides income support to low-income OAS recipients. It is aggressively clawed back against almost all other income sources including RRSP/RRIF withdrawals, CPP, employment, and investment income. The effective clawback rate can reach 50–75% when combined with regular tax, creating very high marginal rates for low-income seniors. TFSA withdrawals are excluded from the GIS income test.

Examples

• A single senior receiving $5,000 in RRIF income could lose $2,500+ in GIS benefits on top of regular income tax, creating an effective marginal rate over 70%.
• The same senior withdrawing $5,000 from a TFSA instead loses $0 in GIS — the TFSA withdrawal doesn't count as income for GIS purposes.

Source: Guaranteed Income Supplement — Government of Canada · Old Age Security pension recovery tax — Government of Canada

Home Buyers' Plan

In plain English: A program that lets you borrow up to $60,000 from your own RRSP tax-free to buy your first home. You pay yourself back over 15 years.

Technically: The Home Buyers' Plan (HBP) allows a qualifying first-time home buyer to withdraw up to $60,000 from their RRSP tax-free to purchase a qualifying home. It functions as a self-issued interest-free loan that must be repaid to the RRSP over a 15-year period, starting the second year after the withdrawal. Missed repayments are added to taxable income.

Examples

• You withdraw $60,000 from your RRSP under the HBP. Your minimum annual repayment is $60,000 ÷ 15 = $4,000/year. If you skip a year, that $4,000 is added to your taxable income.
• A couple can each withdraw $60,000 under HBP for the same home, accessing up to $120,000 combined.

Source: What is the Home Buyers’ Plan (HBP)? — CRA · Important dates for RRSPs, HBP, LLP, FHSAs — CRA

Indexation

In plain English: Each year, CRA adjusts tax brackets and credit amounts upward based on inflation so that rising prices don't push you into a higher bracket unfairly.

Technically: CRA applies an annual indexation factor based on the Consumer Price Index (CPI) to adjust tax bracket thresholds, personal credit amounts, and certain benefit thresholds. This prevents bracket creep — the phenomenon where inflation-driven raises push taxpayers into higher brackets without real income gains. The 2026 federal indexation factor is 2.0%.

Examples

• The 2026 indexation factor of 2.0% increased the basic personal amount from $16,129 to $16,452.
• Federal tax bracket thresholds all rose by 2.0% for 2026, keeping taxpayers in the same effective bracket if their raise only matched inflation.

Source: Indexation adjustment for personal income tax and benefit amounts — CRA · Tax rates and income brackets for individuals — CRA

Lifelong Learning Plan

In plain English: A program that lets you withdraw from your RRSP to pay for full-time school or training — up to $10,000 per year and $20,000 total. You pay it back over 10 years.

Technically: The Lifelong Learning Plan (LLP) allows RRSP withdrawals of up to $10,000 per calendar year and $20,000 in total to finance full-time education or training for the account holder or their spouse. Repayments must be made over a 10-year period. Missed repayments are included in taxable income for that year.

Examples

• You withdraw $10,000 in 2026 and $10,000 in 2027 for a two-year program, totaling $20,000. You repay $2,000/year back to your RRSP over 10 years.
• If you miss a $2,000 LLP repayment, that $2,000 is added to your taxable income for the year.

Source: Lifelong Learning Plan (LLP) — CRA · Important dates for RRSPs, HBP, LLP, FHSAs — CRA

Locked-in retirement account (LIRA)

In plain English: An account that holds money transferred from an employer pension plan. Unlike a regular RRSP, you can't just take out a lump sum — withdrawals are restricted.

Technically: A Locked-In Retirement Account (LIRA) holds funds transferred from an employer's registered pension plan. It restricts bulk withdrawals to preserve the pension benefit for retirement. Provincial pension legislation governs LIRAs, and funds must eventually be transferred to a Life Income Fund (LIF) or used to purchase an annuity to begin receiving income.

Examples

• You leave your job and transfer $80,000 from your employer's defined-benefit pension to a LIRA. You cannot withdraw it as a lump sum.
• At retirement, you convert the LIRA to a LIF, which has both minimum and maximum annual withdrawal limits.

Source: Registered Retirement Savings Plan (RRSP) — CRA · Registered Retirement Income Fund (RRIF) — CRA

Marginal tax rate

In plain English: The percentage of tax you pay on your next dollar of income. It goes up as you earn more because Canada uses tax brackets.

Technically: The rate of tax applied to the last (or next) dollar of taxable income. Canada uses a graduated system where federal and provincial brackets each impose increasing rates as income rises. The marginal rate determines the true tax cost or savings of an additional dollar of income or deduction.

Examples

• An Ontario resident earning $60,000 has a combined federal + provincial marginal rate of about 29.65%. Earning an extra $1,000 means roughly $296.50 more in tax.
• A $5,000 RRSP deduction at a 29.65% marginal rate saves $1,482.50 in tax.

Source: Tax rates and income brackets for individuals — CRA

Non-refundable tax credit

In plain English: A tax credit that can lower your tax bill to zero, but you won't get any money back if the credit is more than what you owe.

Technically: A non-refundable tax credit can reduce a taxpayer's federal or provincial tax liability to zero but cannot generate a refund. Most personal credits (basic personal amount, age amount, disability amount) are non-refundable and computed at the lowest marginal rate of 15% federally. Unused amounts are generally lost unless specifically transferable or carry-forwardable.

Examples

• You owe $2,000 in federal tax and have $2,500 in non-refundable credits. Your tax drops to $0, but the extra $500 is not refunded.
• The 2026 basic personal amount of $16,452 creates a non-refundable credit of $2,468 (15% × $16,452).

Source: All deductions, credits and expenses — CRA · Tax rates and income brackets for individuals — CRA

Non-registered account

In plain English: A regular investment account with no special tax sheltering. You pay tax on interest, dividends, and gains every year as you earn them.

Technically: A non-registered account is an open investment vehicle with no contribution limits or tax sheltering. All investment yield — interest, dividends, and realized capital gains — is taxable annually at the investor's marginal rate. There are no restrictions on deposits or withdrawals, making it fully flexible but fully taxable.

Examples

• You earn $2,000 in interest in a non-registered savings account. The full $2,000 is added to your taxable income at your marginal rate.
• After maxing out your TFSA ($109,000) and RRSP, additional savings go into a non-registered account where a $5,000 capital gain adds $2,500 to taxable income (50% inclusion).

Source: Line 12700 – Capital gains — CRA · Income tax package (T1 General) — CRA

Notice of Assessment

In plain English: A letter from CRA after you file your taxes that confirms how much you owe or get back, and shows your RRSP and TFSA room for next year.

Technically: The Notice of Assessment (NOA) is an official CRA document issued after processing a T1 return. It confirms the final tax calculation (refund or balance owing), validates registered account contribution limits (RRSP deduction limit, TFSA room), and establishes earned income for future RRSP room calculations. It is the authoritative source for contribution room.

Examples

• Your 2025 NOA shows a $2,300 refund, confirms $18,500 of RRSP deduction room for 2026, and reports $109,000 of TFSA room.
• A lender asks for your NOA to verify income when you apply for a mortgage.

Source: CRA My Account for individuals · Income tax package (T1 General) — CRA

Notice of Reassessment

In plain English: An updated version of your Notice of Assessment that CRA sends when something changes — like if you forgot a slip or CRA audited your return.

Technically: A Notice of Reassessment supersedes the original Notice of Assessment when new information arises, a taxpayer files an adjustment request, or an audit is conducted. It may change the tax payable, contribution limits, or benefit entitlements. The reassessment restarts the objection clock for the revised items.

Examples

• You forgot to report a $2,000 T5 interest slip. After filing an adjustment, CRA issues a Notice of Reassessment showing $300 more tax owing.
• CRA audits your home-office expenses and issues a reassessment disallowing $1,500, increasing your tax by $445.

Source: CRA My Account for individuals · Income tax package (T1 General) — CRA

OAS clawback

In plain English: If your income in retirement is too high, the government takes back some or all of your Old Age Security payments. In 2026, this starts when income exceeds $95,323.

Technically: The OAS Pension Recovery Tax (commonly called the OAS clawback) reduces OAS benefits for higher-income retirees. For 2026, the recovery threshold is $95,323 of net income. Benefits are reduced by 15 cents for every dollar of income above the threshold, potentially eliminating the entire OAS pension. TFSA withdrawals are not included in the income test.

Examples

• Your net income is $105,323 — that's $10,000 above the $95,323 threshold. Your OAS is clawed back by 15% × $10,000 = $1,500 for the year.
• RRSP/RRIF withdrawals count toward the OAS clawback income test. TFSA withdrawals do not, making the TFSA advantageous for retirees near the threshold.

Source: Old Age Security pension recovery tax — Government of Canada

Over-contribution

In plain English: Putting more money into your TFSA or RRSP than you're allowed. CRA charges a 1% penalty per month on the excess until you fix it.

Technically: An over-contribution occurs when contributions exceed the available room in a registered account. For TFSAs, any excess amount is subject to a 1% per-month penalty tax with no grace buffer. For RRSPs, there is a lifetime $2,000 buffer before the 1% monthly penalty applies. The penalty continues until the excess is withdrawn or new room absorbs it.

Examples

• You have $5,000 of TFSA room but contribute $8,000. The $3,000 excess is penalized at 1%/month = $30/month until withdrawn.
• You over-contribute $4,500 to your RRSP. The first $2,000 is penalty-free, but the remaining $2,500 is taxed at 1%/month ($25/month).

Source: How to calculate your TFSA contribution room — CRA · Registered Retirement Savings Plan (RRSP) — CRA

Pension adjustment

In plain English: If your employer provides a pension, the value of that pension benefit reduces your RRSP room. It keeps things fair between people with and without workplace pensions.

Technically: A pension adjustment (PA) represents the value of the benefit earned in a given year under an employer's registered pension plan (RPP) or deferred profit-sharing plan (DPSP). The PA reduces the following year's RRSP deduction limit, ensuring equitable tax-sheltered savings between employees with and without employer pensions.

Examples

• Your employer's defined-benefit pension generates a $6,000 PA for 2025. Your 2026 RRSP room is reduced by $6,000 — so 18% × $90,000 – $6,000 = $10,200.
• Without an employer pension (PA = $0), the same $90,000 income gives full RRSP room of $16,200.

Source: Registered Retirement Savings Plan (RRSP) — CRA · T4 slip: Statement of Remuneration Paid — CRA

Qualifying home

In plain English: A property that's eligible for programs like the FHSA or Home Buyers' Plan — basically a home in Canada that you plan to live in.

Technically: A qualifying home is a housing unit located in Canada that the individual intends to occupy as their principal place of residence within one year of acquisition. It includes detached homes, semi-detached, townhouses, condos, mobile homes, and shares in a co-operative housing corporation. The property must meet eligibility criteria for FHSA withdrawals or HBP use.

Examples

• You buy a condo in Toronto for $500,000 and plan to move in within a year — it qualifies for an FHSA withdrawal and HBP.
• An investment rental property you don't intend to live in does not qualify for the HBP or FHSA.

Source: Opening your FHSAs: who can open an account — CRA · What is the Home Buyers’ Plan (HBP)? — CRA

Refundable tax credit

In plain English: A tax credit that gets paid out to you even if you owe zero tax. It can actually put money in your pocket.

Technically: A refundable tax credit is paid out to the taxpayer even when total tax liability is zero, effectively functioning as a direct government transfer. Examples include the GST/HST credit and the Canada Workers Benefit. Unlike non-refundable credits, the full value is always received regardless of income tax owed.

Examples

• You owe $0 in tax but qualify for a $300 GST/HST credit. CRA pays you the full $300.
• A low-income worker with $500 in tax owing receives a $1,200 refundable credit — the remaining $700 is paid out as a refund.

Source: All deductions, credits and expenses — CRA · Canada child benefit — CRA

Registered account

In plain English: A special investment account registered with the government that gives you tax benefits — like a TFSA, RRSP, or FHSA. Each has its own rules and limits.

Technically: A registered account is a statutory tax-sheltered investment vehicle governed by specific sections of the Income Tax Act. Examples include the TFSA (ITA 146.2), RRSP (ITA 146), FHSA (ITA 146.6), RESP (ITA 146.1), and RDSP. Each has legislated contribution limits, tax treatment rules, and CRA reporting requirements.

Examples

• Your TFSA, RRSP, and FHSA are all registered accounts — each shelters investment growth from annual taxation.
• You can hold stocks, bonds, GICs, and mutual funds inside a registered account like an RRSP, and the growth is not taxed until withdrawal.

Source: Tax-Free Savings Account (TFSA) — CRA · Registered Retirement Savings Plan (RRSP) — CRA · First Home Savings Account (FHSA) — CRA · Registered Education Savings Plans (RESPs) — Government of Canada

RRIF (Registered Retirement Income Fund)

In plain English: When you turn 71, you must convert your RRSP into a RRIF. Then you have to withdraw a minimum amount each year, and it's taxed as income.

Technically: A Registered Retirement Income Fund (RRIF) is the mandatory successor to an RRSP. Conversion must occur by December 31 of the year the annuitant turns 71. A minimum annual withdrawal is required based on the account balance and the annuitant's age (or younger spouse's age), and all withdrawals are included in taxable income. There is no maximum withdrawal.

Examples

• You turn 71 in 2026 and must convert your $500,000 RRSP to a RRIF by December 31, 2026. Your minimum withdrawal in 2027 (age 72) is 5.40% = $27,000, fully taxable.
• You can elect to use your younger spouse's age for the minimum withdrawal formula, reducing the required amount.

Source: Registered Retirement Income Fund (RRIF) — CRA

Spousal RRSP

In plain English: The higher earner in a couple contributes to their spouse's RRSP. They get the tax deduction now, and the spouse withdraws it later at a lower tax rate in retirement.

Technically: A spousal RRSP allows a higher-income spouse to contribute to the lower-income spouse's RRSP using the contributor's own deduction room. The contributor claims the deduction at their higher marginal rate, while the annuitant (lower-income spouse) is taxed on withdrawals at their lower rate in retirement. A three-calendar-year attribution rule applies to prevent immediate income-splitting.

Examples

• You earn $120,000 (33% bracket) and contribute $10,000 to your spouse's RRSP, saving $3,300 in tax. Your spouse withdraws it in retirement at a 20% rate, paying only $2,000.
• If your spouse withdraws from the spousal RRSP within 3 calendar years of your last contribution, the withdrawal is attributed back to you and taxed at your rate.

Source: Registered Retirement Savings Plan (RRSP) — CRA · Tax rates on RRSP withdrawals — CRA

T1 General

In plain English: The main tax return form every Canadian files each year. It's where you add up your income, claim deductions and credits, and figure out what you owe or get back.

Technically: The T1 General — Income Tax and Benefit Return is the annual return filed by Canadian individuals with the CRA. It reports total income from all sources, calculates net and taxable income after deductions, applies federal and provincial credits, and determines the final tax payable or refund owing.

Examples

• You file your 2025 T1 General by April 30, 2026, reporting $75,000 employment income, $5,000 RRSP deduction, and claiming the basic personal amount credit.
• A self-employed person files their T1 General by June 15, 2026, but any balance owing is still due by April 30.

Source: Income tax package (T1 General) — CRA

T4 slip

In plain English: A slip your employer gives you showing how much you earned and how much tax, CPP, and EI were taken off your pay during the year.

Technically: The T4 — Statement of Remuneration Paid is issued by employers to report gross employment income, income tax deducted at source, CPP/QPP contributions, EI premiums, and other source deductions. Employers must issue T4 slips by the last day of February following the calendar year. The amounts flow onto the T1 General return.

Examples

• Your T4 shows $80,000 in Box 14 (employment income), $15,200 in Box 22 (income tax deducted), and $3,867 in Box 16 (CPP contributions) for 2025.
• You received two T4s because you changed jobs mid-year — both get reported on your single T1 return.

Source: T4 slip: Statement of Remuneration Paid — CRA · CPP contribution rates, maximums and exemptions — CRA

Tax credit

In plain English: An amount that directly reduces the tax you owe, dollar for dollar. Unlike a deduction, it doesn't matter what bracket you're in — a $500 credit saves everyone $500.

Technically: A tax credit reduces the final tax liability directly, as opposed to a deduction which reduces taxable income. Credits may be non-refundable (reduce tax to zero but no further) or refundable (paid out even if tax owed is zero). Most federal non-refundable credits are calculated at the lowest personal tax rate of 15%.

Examples

• The basic personal amount credit of $16,452 at the 15% federal rate reduces your federal tax by $2,468.
• A $1,000 non-refundable credit reduces your $3,000 tax bill to $2,000. If your bill were only $800, it drops to $0 — the extra $200 is lost.

Source: All deductions, credits and expenses — CRA

Tax deduction

In plain English: An amount that reduces the income the government taxes you on, before your tax rate is applied. The higher your tax bracket, the more a deduction saves you.

Technically: A deduction reduces taxable income before tax rates are applied. The tax savings equal the deduction amount multiplied by the taxpayer's marginal rate. Common deductions include RRSP contributions, union dues, and child-care expenses. Deductions are more valuable to higher-income taxpayers because of higher marginal rates.

Examples

• A $10,000 RRSP deduction at a 29.65% combined marginal rate saves $2,965 in tax. The same $10,000 deduction at a 48.35% rate saves $4,835.
• You earn $70,000 and contribute $5,000 to your RRSP. Your taxable income drops to $65,000, saving you about $1,482.

Source: All deductions, credits and expenses — CRA · Registered Retirement Savings Plan (RRSP) — CRA

Tax-deferred

In plain English: You get a tax break now when you put money in (like an RRSP), but you pay tax later when you take it out. The tax is delayed, not eliminated.

Technically: Tax-deferred describes the RRSP mechanism where contributions generate a deduction against current income, investments grow without annual taxation, but all withdrawals are included in taxable income in the year received. The benefit arises when the withdrawal marginal rate is lower than the contribution marginal rate, which is typical in retirement.

Examples

• You contribute $10,000 to your RRSP at a 33% marginal rate, saving $3,300 now. In retirement, you withdraw $10,000 at a 20% rate, paying only $2,000 — net benefit of $1,300.
• RRSP investments grow from $50,000 to $80,000 over 10 years with no tax along the way, but the full $80,000 is taxable when withdrawn.

Source: Registered Retirement Savings Plan (RRSP) — CRA · Registered Retirement Income Fund (RRIF) — CRA

Tax-free

In plain English: Money that grows and can be withdrawn without you ever paying tax on it. TFSA and qualifying FHSA withdrawals are tax-free.

Technically: Tax-free describes investment growth and withdrawals that are not subject to any income tax. In Canada, TFSAs (ITA 146.2) and qualifying FHSA withdrawals provide fully tax-free treatment — contributions are made with after-tax dollars, and neither the growth nor the withdrawals are included in taxable income.

Examples

• You invest $7,000 in your TFSA and it grows to $9,500. You withdraw the full $9,500 and report $0 on your tax return.
• A qualifying FHSA withdrawal of $40,000 for a first home purchase is completely tax-free.

Source: Tax-Free Savings Account (TFSA) — CRA · First Home Savings Account (FHSA) — CRA

TFSA (Tax-Free Savings Account)

In plain English: A savings account where your money grows tax-free and you pay no tax when you take it out. The government sets a yearly limit on how much you can put in.

Technically: A registered account governed by ITA Section 146.2 that accepts after-tax contributions. All investment growth and withdrawals are completely tax-free. The 2026 annual contribution limit is $7,000, with cumulative room of $109,000 for individuals eligible since 2009. Withdrawn amounts restore as new contribution room on January 1 of the following year. Over-contributions are subject to a 1% per-month penalty tax.

Examples

• You contribute $7,000 to your TFSA in 2026. It grows to $8,200. You withdraw the full $8,200 tax-free, and on January 1, 2027 you regain $8,200 in contribution room.
• Someone who turned 18 in 2009 and never contributed has $109,000 of total TFSA room in 2026.

Related: Contribution room · Tax-free · Registered account

Source: Tax-Free Savings Account (TFSA) — CRA · MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and YAMPE — CRA · How to calculate your TFSA contribution room — CRA

Withholding tax

In plain English: Tax that gets taken off your pay before you even receive it. Your employer sends it straight to CRA on your behalf throughout the year.

Technically: Withholding tax is a mandatory prepayment of estimated income tax deducted at source by the payer (typically an employer) and remitted to CRA. The amount is based on the employee's TD1 form and projected annual income. Withholding also applies to RRSP withdrawals (10%/20%/30% depending on amount) and certain payments to non-residents.

Examples

• Your employer withholds $1,200/month in income tax from your $80,000 salary. At tax time, if too much was withheld, you get a refund.
• You withdraw $15,000 from your RRSP (outside HBP). The financial institution withholds 20% ($3,000) and sends it to CRA. You report the full $15,000 as income on your return.

Source: Tax rates on RRSP withdrawals — CRA · Individuals leaving or entering Canada and non-residents — CRA