Tax-Free Growth
Quick Definition
Investment gains that are never subject to income tax, like TFSA earnings.
Full Explanation
Tax-free growth means investment returns — capital gains, dividends, and interest — are never subject to income tax, regardless of when they are withdrawn. In Canada, the TFSA provides tax-free growth: you contribute after-tax dollars, but all growth and withdrawals are completely tax-exempt. The FHSA also provides tax-free withdrawal for qualifying home purchases. Tax-free growth is most valuable for investments with high expected returns held over long periods, since the compounding effect on sheltered gains can be enormous compared to taxable accounts.
Related Terms
TFSA (Tax-Free Savings Account)
A flexible registered account where investment growth and withdrawals are completely tax-free.
FHSA (First Home Savings Account)
A new registered account combining RRSP and TFSA benefits specifically for first-time home buyers.
RRSP (Registered Retirement Savings Plan)
A tax-deferred savings account for retirement, with deductible contributions.
Tax-Deferred
Growth or income that is not taxed until withdrawal, allowing faster compounding.
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