RRSP capital gains are taxable yet tax-free

Here's a common misconception: "Non-registered capital gains are only taxed as 50% of income, this is better than RRSP where your gains are taxed as 100% income"

Let's recall the simplistic mathematical model, assuming you invest in something that generates purely capital gains:

• RRSP: Gross income × Growth (1 - tax rate later)

• TFSA: Gross income × (1 - tax rate today) × Growth

• Non-reg: Gross income × (1 - tax rate today) × Growth - 50% × Capital gains × Tax rate later

With that, it's easy to see that if your tax rate later is close to 0%, the taxable account will essentially approximate the behavior of a TFSA. But if tax rate later = 0%, you would have still been better off investing the entire gross amount all those years ago. On the flip side, if tax rate today = 0% then yes, don't contribute in the RRSP just yet.