Non-Registered Personal Accounts

All income activities (dividends, interest earned, and realized gains and/or losses) are taxable within non-registered accounts such as Personal accounts, Joint accounts, Corporate accounts, Cash accounts and Save accounts. This means it's important to consider what sort of taxes you could be liable for before liquidating or moving assets held within a non-registered account.

Taxes on capital gains or losses

If you sell one of your holdings for more than you bought it for, you will have realized capital gains. When looking at tax implications, 50% of realized capital gains are taxed at your applicable marginal tax rate. This means that half of your total gains are yours to keep, while the other half is added to your total income for the year and taxed accordingly.

If you sell one of your holdings for less than you bought it for, you will have realized a capital loss. If a capital loss is realized, 50% of the loss can be used to reduce taxable capital gains. Capital losses can only be claimed against capital gains (i.e. it cannot be used to reduce any other forms of taxable income). If the capital loss cannot be used in the year that it is incurred, then it can be carried back up to 3 years previous or carried forward indefinitely.

Taxes on dividends

Dividends received from securities are considered to be income, and therefore are subject to tax when received within a non-tax sheltered account (i.e. a non-registered account).

With US-listed securities, there is also a non-resident tax (NRT) is deducted from your account as a result of owning them within a non-registered account (Personal, Joint, or Corporate), TFSA or RESP. This is because these accounts are not recognized by the cross-border US/Canadian tax agreement. The NRT rate is 15% and is automatically deducted from your account for you. Despite this tax, there is no requirement to file any forms with the IRS.

Finally, Canadian dividends may be eligible for the dividend tax credit (reduces the taxes payable).

Tax-Free Savings Accounts (TFSAs)

Tax-Free Savings accounts are pretty much just that - a tax-free way to watch your investments grow. While you can't claim contributions to your TFSA on your taxes, the returns that you accumulate within your TFSA are sheltered, so if you make a withdrawal, you don't have to worry about paying taxes. Conversely, the tax-free benefits of TFSAs mean that you cannot claim losses in these accounts. The tax-free nature of these accounts, as well as the nature of the contributions, mean that there are no associated tax slips issued for TFSAs.

Just be careful not to over-contribute to your TFSA, otherwise, you could receive a bill from the CRA. More on that below.

Your contribution room accumulates from the year you turned 18 as long as you were a resident of Canada for tax purposes. Each annual contribution limit since TFSAs were first introduced in 2009 are as follows:

• 2009, 2010, 2011 and 2012 was $5,000
• 2013 and 2014 was $5,500
• 2015 was $10,000
• 2016, 2017, and 2018 was $5,500
• 2019, 2020, 2021, and 2022 was set at $6,000
• 2023 was $6,500
• 2024 is $7,000

Taxes on capital gains or losses

There are no taxes on capital gains or losses in a TFSA.

Taxes on dividends

For US-listed securities, a non-resident tax (NRT) is deducted from your account as a result of owning them within a non-registered account (Personal, Joint, or Corporate), TFSA or RESP. This is because these accounts are not recognized by the cross-border US/Canadian tax agreement. The NRT rate is 15% and is automatically deducted from your account for you. Despite this tax, there is no requirement to file any forms with the IRS.

Registered Retirement Savings Plans (RRSPs or Spousal RRSPs)

There are limitations to how much you can contribute on an annual basis to your RRSP. You may annually contribute whichever is lower of the following:

• 18% of your earned pre-tax income from the previous year or;
• A maximum of $27,230 (2020)
• The remaining limit after any company-sponsored pension plan contribution

Regardless of whether you contribute to your RRSP or a Spousal RRSP, the contribution counts towards your own contribution limit. Every Canadian is allowed to over-contribute $2,000 once in their lifetime, but if you over-contribute beyond this amount, you'll be charged a penalty tax of 1% of the over-contribution amount per month.

If you're not certain what available contribution room you have, we highly recommend setting up a MyCRA online profile, which you can do here.

Taxes on capital gains or losses

There are no taxes on capital gains or losses in an RRSP.

Taxes on dividends

There are no taxes on dividends in an RRSP.

RRIFs, Spousal RRIFs, and LIF Accounts

You're not required to make a withdrawal the year you convert your account, however moving forward into the next calendar year, and for all future calendar years, there will be a minimum amount you must withdraw each year. The minimum amount is based on the previous year-end value of the account, and multiplied by a factor value that is determined by the government based on your age each year. If by year-end you have not withdrawn at least the minimum amount, your RRIF, Spousal RRIF, or LIF provider will automatically send you the necessary amount.

Wealthsimple also offers an RRSP contribution tracker, which will allow you to estimate your contribution room with some accuracy, but we still highly recommend setting up a MyCRA profile to verify our estimation. 

Registered Education Savings Plans (RESPs and Co-owned RESPs)

If you withdraw from an RESP for non-educational purposes a withholding tax would be applied from the outset of the withdrawal, so no further tax implications will follow from this. No tax implications follow for the subscribers (owners) of the RESP accounts when a withdrawal is made for educational purposes. When a withdrawal is made for educational purposes, the beneficiary has the portion that was withdrawn from grants taxed as income.

Learn more about RESPs here.

First Home Savings Accounts (FHSAs)

FHSAs are very, very specific tax-free savings accounts that help Canadians save up to $40,000 toward buying a first home (in Canada). You can contribute as much as $8,000 per year, but unused portions of your contribution limit carry forward. For example, if you contribute $5,500 in 2023, the maximum contribution you could make in 2024 would be $10,500 (the $2,500 space leftover from 2023 plus the $8,000 of new contribution room from 2024).

Like an RRSP, any contributions you make to your FHSA reduce your taxable income for the year. Like a TFSA, the money in your FHSA (including any gains) will not be taxed.

Any contributions over the $8,000 annual limit (except for any unused portions from the previous year) will be hit with a 1% penalty every month until you correct the issue.

Learn about tax slips for each account type

RRSP, Spousal RRSP and LIRA accounts

Personal, Joint and Corporate non-registered accounts

Crypto accounts

RESP accounts

FHSA accounts

TFSA accounts

There are no tax slips associated with TFSAs. As long as you stay within your contribution limit, there are no tax implications with a TFSA. Therefore there are no corresponding tax slips.

Troubleshooting an incorrect tax slip

If you believe something on your tax slip is incorrect, please reach out to our support team so we can resolve this for you When reaching out, please specify what you believe is inaccurate.

If the personal details listed on your tax slip are incorrect or outdated (i.e. if you moved to a new address or changed your last name) this is okay - as long as your SIN matches the CRA will still consider the other details on the tax slip to be accurate.

Frequently asked questions

• Will I get taxed if I transfer my RRSP or TFSA from another institution to Wealthsimple?
  No, there is no tax penalty for transferring your RRSP or TFSA from one institution to another.
  
  When transferring your account, you'll be asked whether you'd like to transfer your account “as cash” or “holdings as is” and depending on the investments you hold, there can be fees associated with choosing one over the other. We'd suggest reading our guide to institutional transfers before transferring your account, just to make sure you don't end up paying unnecessary fees.
  
  
• Are there any considerations for holding US securities?
  Other than the non-resident tax charged on dividends, depending on how much you have invested in US-listed securities, you may also need to fill out a T1135. When someone has the equivalent of $100K CAD or greater invested in foreign assets (i.e. US-listed securities), this form is typically required. If you're not certain whether you should be filling out a T1135, we recommend consulting a tax professional.