The April 30 tax filing deadline is nearing. You must be busy crunching the numbers, finding tax savings possibilities. It is already too late to invest in a Registered Retirement Savings Plan (RRSP) and claim a deduction on the contributed amount for the 2025 tax year. While an RRSP can’t help you reduce your 2025 tax, a Tax-Free Savings Account (TFSA) can help you earn investment income equivalent to the amount of tax savings.
Millionaires and investors always look for ways to earn more to make up for losses and devise a strategy to not repeat the mistake.
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1 move to compensate for a missed RRSP deadline
The Canada Revenue Agency (CRA) allows Canadians to contribute 18% of their taxable income from the previous year up to a certain limit (2025 limit of $32,490). Even if you missed your RRSP deadline, the 2025 contribution room will carry forward to next year.
What you can do is invest the amount you planned for an RRSP in a Tax-Free Savings Account (TFSA) if you have sufficient TFSA contribution room. Even a TFSA can help you build a retirement pool. In fact, its tax-free withdrawals are a much better mode of retirement passive income than an RRSP’s taxable withdrawals.
The TFSA will take care of the retirement savings. As for tax savings, you can invest in growth stocks now and earn back the amount paid in taxes through capital gains, which you can withdraw tax-free.
Compensate RRSP tax savings with TFSA income
Suppose Amy has an annual taxable income of $80,000 in 2024. Her RRSP contribution room is $14,400. She planned to invest $7,000 in an RRSP in 2025 and achieve tax savings of $1,435 at a 20.5% tax rate, but missed the deadline.
Amy can instead invest that $7,000 in a TFSA, as that is the 2026 contribution limit set by the CRA. That amount can be invested in Shopify (TSX:SHOP) or Kinross Gold (TSX:K) as these stocks could surge more than 20% in the next six to eight months. Had you invested this amount in these stocks through an RRSP, the withdrawals up to $5,000 would be taxed at 10% and between $5,001 and $15,000 at 20% until retirement, negating the current tax savings.
Even though you pay the $1,435 tax now, the $7,000 TFSA investment can earn you way more than $1,435 in the long term, and all that amount would be tax-free. Shopify can double your money in five years with its consistent 30% revenue growth and double-digit free cash flow margins, adding to its share price.
Kinross Gold’s share price could rally as the gold price increases amid central bank buying. The tariffs, wars, and increasing credit risk of US Treasuries could push central banks to increase their gold reserves. Since gold supply is limited, the gold price could double in a year. The gold stock has already surged 29% from the March dip due to the Iran war. Those who bought the dip have already recovered the 20.5% tax rate through capital appreciation.
1 move to avoid missing the RRSP deadline in the future
While a TFSA presents a good opportunity, one should also make the most of an RRSP. The key reason for missing the RRSP deadline is last-minute tax planning. Instead, one should make investing a habit. Consider investing $500 per month in an RRSP. It will not be heavy on your pocket. Plus, you can take advantage of dollar-cost averaging and reduce your overall cost per share.
An ideal RRSP stock to invest $500 per month in is a dividend stock like Granite REIT (TSX:GRT.UN). Granite REIT’s stock hovers between $65 and $80 throughout the year, because of which its annual yield is in the 3.6–5.5% range. The REIT gives monthly payouts, which you can reinvest, as RRSP withdrawals are taxable.
Staying invested in the long term can help you benefit from the 4% average annual dividend growth. This REIT’s key advantage is its portfolio of 141 warehouse and distribution centres across North America and Europe.
Investor takeaway
There is always an alternative to missed opportunities if you look carefully and change your approach. Never stop investing, as the market rewards those who spend time in the market.
