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Asset Location in Canada (2026): Which Investments to Hold in a TFSA, RRSP or Taxable Account

Updated

Asset location is the decision about which account holds which investment: a TFSA, an RRSP, an FHSA or a taxable (non-registered) account. Two investors with the same mix of stocks and bonds can keep different amounts after tax depending on where each holding sits. This page covers how each type of investment income is taxed, which account usually suits it, and the special case of US and foreign holdings, where withholding tax depends on the account. It is one of our investing basics guides.

How each kind of investment income is taxed in a taxable account

Income typeTax treatment in a non-registered account
Interest (bonds, GICs, savings)Fully taxable at your marginal rate, every year
Canadian eligible dividendsGrossed up, then reduced by the dividend tax credit
Capital gains50% of the gain is taxable, and only when you sell
US and foreign dividendsTaxable in Canada; foreign tax withheld can usually be claimed as a foreign tax credit
Return of capitalA return of capital isn't taxed in the year you receive it. It reduces the adjusted cost base (ACB) of your units.

Interest is the most heavily taxed kind of income at every income level. Whether eligible dividends or capital gains are taxed less depends on your income: eligible dividends are taxed less at lower and middle incomes, and capital gains at the top bracket. The exact rates depend on your province and income; the marginal tax rate calculator shows yours.

Which account usually suits each investment

InvestmentUsual first choiceWhy
Bonds, bond ETFs, GICsRRSP or TFSAInterest is fully taxable in a taxable account
US-listed stocks and ETFs that pay dividendsRRSPTreaty exemption from US withholding tax
Canadian equity and Canadian dividend stocksTFSA, or a taxable accountNo foreign withholding; the dividend tax credit makes them efficient in a taxable account, and it is lost inside an RRSP
High-growth, low-dividend holdingsTFSAGains are never taxed
REITsRRSP or TFSADistributions often include “other income”, which is fully taxable like interest
International (non-US) equity fundsTaxable account or RRSPForeign tax withheld is recoverable as a credit only in a taxable account
All-in-one ETFs (XEQT, VEQT and similar)Any accountSimplicity usually outweighs the small tax difference

The usual order when accounts overflow

If your TFSA and RRSP have room for everything, asset location barely matters: everything is sheltered. It matters when part of the portfolio has to go into a taxable account. A common order:

  1. RRSP: bonds and interest-paying investments, and US-listed dividend payers.
  2. TFSA: the holdings with the highest expected growth, plus Canadian equity.
  3. Taxable account: Canadian eligible-dividend stocks and broad equity ETFs, whose income is the least heavily taxed.

Whether to fill the RRSP or the TFSA first is a separate question that depends on your tax rate now and in retirement; see TFSA vs RRSP for beginners. An FHSA is usually held for a shorter period and follows the same logic as a TFSA for withholding tax.

US and foreign holdings: withholding tax by account

When a US company or US-listed ETF pays a dividend to a Canadian, the US withholds tax before the money arrives. Whether you get it back depends on the account.

AccountUS withholding on dividends from US-listed securitiesCan you recover it?
RRSP, RRIF0%Nothing to recover: the Canada-US tax treaty exempts these retirement accounts
TFSA15%No. The IRS does not treat a TFSA as a retirement plan
FHSA15%No
Non-registered15%Usually yes, as a foreign tax credit on Form T2209

Three points change the picture:

  • Canadian-listed ETFs that hold US stocks (for example VFV or XUS) have the US tax withheld inside the fund, before you receive anything. The RRSP exemption does not reach that fund-level withholding, so it applies in every account. Holding the US-listed version in an RRSP avoids it, at the cost of converting to US dollars; Norbert’s Gambit is the low-cost way to do that. The fund-level mechanics are covered in US-listed vs Canadian-listed ETFs.
  • Non-US foreign dividends (European, emerging markets) are withheld at rates set by other countries, and the RRSP exemption in the US treaty does not apply to them.
  • Low-dividend growth stocks lose little to withholding in any account, since there is little dividend to withhold from.

Example: $200,000 of US equity with a 1.5% dividend yield pays about $3,000 a year in dividends. At 15% withholding, that is about $450 a year withheld. In a TFSA that amount is gone; in an RRSP holding US-listed shares nothing is withheld; in a taxable account it is withheld and usually claimed back through the foreign tax credit.

The account-specific rules are covered in US dividend withholding tax in a TFSA and US dividend withholding tax in an RRSP. For how to buy US shares in the first place, see how to buy US stocks from Canada.

Example portfolio

An investor with $200,000 split $80,000 TFSA, $80,000 RRSP and $40,000 taxable:

AccountAmountHoldingsReason
TFSA$80,000XEQT (all-in-one equity)Growth sheltered from tax permanently
RRSP$80,000US equity + ZAG (bonds)Interest sheltered; US withholding avoided on US-listed holdings
Taxable$40,000XIC (Canadian equity)Dividend tax credit; gains taxed only on sale

The same overall mix of stocks and bonds could be held in each account instead; placing each part deliberately only changes the tax treatment.

When asset location does not matter much

  • Everything fits in registered accounts. If your TFSA and RRSP hold your whole portfolio, it is all sheltered.
  • You hold one all-in-one ETF. XEQT in every account is simpler, and for smaller portfolios the tax savings rarely justify the added complexity.
  • Small portfolios. The dollar benefit grows with the size of the taxable portion.

Sources

The figures and rules on this page come from these sources, last checked against them between September 23, 2026 and October 1, 2026. How we check facts.