RRSP vs. Capital Gains Calculator
Are You Better Off Investing Inside or Outside Your RRSP?
With the capital gains inclusion rate now at 50%, is an RRSP the best vehicle to maximize the after-tax value of your investments?
The sale of a stock or a mutual fund triggers a capital gain or a capital loss. A capital gain is the difference between the purchase price of a stock and its adjusted cost base. If a stock is sold below the adjusted cost base, the difference is a capital loss.
The calculation below works well for stocks. However, if the investment is an equity mutual fund, the fund's capital gains may be quite different from the appreciation of the stocks upon which the unit value is based.
Your best option depends on the following factors:
- Duration of investment (number of years holding this investment)
- Future rate of investment return
- Marginal tax rate
- Capital gains inclusion percentage
What happens if you invest the money in your RRSP?
You get tax-free compounding of your investments and a tax refund that you can re-invest. When you eventually withdraw the money from the registered plan, withdrawals are taxed as income.
What happens if you invest the money outside your RRSP?
There is no tax triggered until you sell the investment. When you sell, you pay tax only on a fraction of the capital gain.
Compare Investments Inside vs. Outside RRSP
Enter the amount to invest, the expected rate of return, duration and marginal tax rate to see whether investing outside the RRSP will result in a greater amount of money than investing in an RRSP.
Calculation results...
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Assumptions
The calculator uses the following assumptions:
- Both the Federal and Provincial Governments apply the same capital gains inclusion rate
- Marginal tax rate is the rate in effect at the time of sale of the investment
- The tax refund for the RRSP contribution is available immediately for re-investment
- The unused RRSP deduction limit is sufficient to allow a full deduction for the RRSP contribution
