Step 1
Make an RRSP contribution
$30,000
→
RRSP
A deductible RRSP contribution can reduce taxable income. The calculator estimates the tax reduction using the selected marginal tax rate.
Canadian tax-planning illustration
RRSP Triple Dip Strategy
One contribution can create a chain of tax deductions and investment opportunities: contribute to an RRSP, use the resulting tax reduction to help service eligible investment-loan interest, then direct the potential tax savings from that interest deduction into a TFSA.
RRSP deduction
Eligible investment-loan interest
TFSA tax-free growth
Leveraged investing risk
1
Fund the RRSPEstimate the tax reduction
2
Service eligible loan interestPotential deduction if CRA conditions are met
3
Fund the TFSASubject to available TFSA contribution room
Each illustration uses the client’s own assumptions. A “refund” is not guaranteed; the actual result depends on the client’s full tax return, deductions, credits, withholding and contribution room.
How the three-step flow works
The social-post concept is useful, but the tax mechanics need to be stated more precisely.
Step 2
Pay investment-loan interest
INVESTMENT LOAN
$250,000
$250,000
→
$15,000 interest
If borrowed money is used for an eligible income-earning investment in a non-registered account, the interest may be deductible. The loan principal itself is not a deduction.
Step 3
Direct the tax savings to the TFSA
$7,500
→
TFSA
The estimated tax savings from eligible interest can be contributed to a TFSA, but only to the extent the client has available TFSA room.
Important correction to the infographic:
the CRA rule is not simply “buy a dividend fund.” Generally, the borrowed money must be used to try to earn income from business or property, such as interest or dividends.
If the only possible return is capital gains, the interest is not deductible. Proper tracing of borrowed funds is also important.
🔒 Advisor Illustration Tool
Get your personalized RRSP Triple Dip illustration
This strategy calculator is used by Pankaj Bhatia, PFA, CHS to prepare personalized client illustrations. It estimates the RRSP tax reduction, investment-loan interest and the tax savings from eligible interest, the TFSA amount within your available room, and long-term RRSP, TFSA and leveraged-account values, repeated every year or done once, with a PDF you can keep.
Please contact Pankaj Bhatia for an illustration with your own numbers.
Worked example
$30,000 RRSP contribution, $250,000 investment loan at 6%, 50% marginal tax rate
The first-year steps, using a simple marginal-rate estimate:
Step 1 — RRSP tax reduction$15,000
Annual loan interest$15,000
Step 2 — interest tax savings$7,500
Step 3 — TFSA amount (room $7,500)$7,500
After-tax borrowing rate if all interest is deductible3.00%
After 20 years, with the same return in the RRSP, TFSA and leveraged account and a 35% assumed tax rate on future RRSP withdrawals:
| Pattern | Annual return | RRSP after withdrawal tax | TFSA | Leveraged equity before tax |
|---|---|---|---|---|
| Repeated every year | 0% | $390,000 | $150,000 | $0 |
| Repeated every year | 4% | $603,899 | $223,336 | $297,781 |
| Repeated every year | 7% | $855,371 | $307,466 | $717,421 |
| Done once | 4% | $42,727 | $15,801 | $297,781 |
| Done once | 7% | $75,459 | $27,124 | $717,421 |
Leveraged equity is the account’s market value less the $250,000 loan principal, which is still owed; it is shown before tax on investment income or disposition. Loan interest of $15,000 a year continues for as long as the loan is outstanding, and returns can be negative while interest is still payable. The interest deduction assumes the borrowed money is used to try to earn income from business or property and is properly traced; if the only possible return is capital gains, the interest is not deductible. The repeated pattern assumes $7,500 of TFSA room is available each year. Fees are not modelled. Hypothetical example, not a forecast, a tax-return calculation or a recommendation.
What must be true for this to work properly
Tax mechanics
- The RRSP contribution must be deductible within the client’s available RRSP deduction limit.
- Interest on borrowed money is generally considered only when the borrowed funds are used to try to earn income from business or property. If the investment can only produce capital gains, CRA says the interest is not deductible.
- The borrowed-money use must be traceable. Mixing borrowed funds with personal spending can create problems.
- Borrowing to contribute directly to an RRSP, TFSA, FHSA or certain other registered plans does not make that borrowing interest deductible.
- The TFSA contribution is limited by the client’s actual available TFSA contribution room.
Leverage and suitability risks
- The $250,000 loan is still owed. An interest-only payment does not reduce principal.
- Investment returns can be negative while loan interest continues to be payable.
- Variable borrowing costs can rise and compress or eliminate the expected return spread.
- RRSP withdrawals are generally taxable. TFSA withdrawals are generally tax-free, subject to the TFSA rules.
- This strategy is most sensitive to cash-flow strength, time horizon, risk tolerance and the client’s ability to carry debt through a market decline.
Frequently asked questions
What is the RRSP Triple Dip strategy?
It coordinates three steps: an RRSP contribution that can reduce taxable income, a non-registered investment loan whose interest may be deductible if the borrowed money is used to try to earn income from business or property, and a TFSA contribution funded by the estimated tax savings from that interest, subject to available TFSA room.
Is the interest on an investment loan always deductible?
No. Generally, the borrowed money must be used to try to earn income from business or property, such as interest or dividends. If the only possible return is capital gains, the interest is not deductible, and proper tracing of the borrowed funds is important. Borrowing to contribute directly to an RRSP, TFSA, FHSA or certain other registered plans does not make that interest deductible.
Does the loan principal reduce my taxes?
No. The loan principal itself is not a deduction. With an interest-only loan, the payments cover interest and the full principal is still owed; investment returns can be negative while interest continues to be payable.
Is the RRSP tax reduction the same as my tax refund?
No. The illustration estimates tax effects by multiplying amounts by an assumed marginal tax rate. The actual result depends on the full tax return, deductions, credits, withholding and contribution room.
Can I get an illustration with my own numbers?
Yes. Pankaj Bhatia can prepare a personalized illustration using your RRSP contribution, tax rate, loan amount and rate, TFSA room and return assumptions, and send it as a PDF, email or WhatsApp summary or a private link.
CRA references
RRSP: deductible RRSP contributions can reduce tax, while income generally grows tax-deferred until withdrawal.
CRA — Registered Retirement Savings Plan (RRSP)
Investment-loan interest: CRA states that most interest paid on money borrowed and used to try to earn investment income, such as interest and dividends, may be deductible; if the only possible earnings are capital gains, the interest is not deductible. CRA — Line 22100 carrying charges and interest expenses
TFSA: contributions are not deductible, but investment income and withdrawals are generally tax-free, subject to TFSA rules and contribution room. CRA — What is a TFSA
Investment-loan interest: CRA states that most interest paid on money borrowed and used to try to earn investment income, such as interest and dividends, may be deductible; if the only possible earnings are capital gains, the interest is not deductible. CRA — Line 22100 carrying charges and interest expenses
TFSA: contributions are not deductible, but investment income and withdrawals are generally tax-free, subject to TFSA rules and contribution room. CRA — What is a TFSA