Tax-Free Account Growth Calculator

Tax-Free Savings Accounts (TFSA in Canada; ISA in the UK; Roth IRA in the U.S.) allow your investments to grow without ever paying tax on the gains or withdrawals. Understanding the compounding effect over time shows just how powerful these accounts are compared to taxable equivalents.

Formula (compound growth): Future Value = Contribution × ((1 + r)^n − 1) ÷ r × (1 + r) (for regular annual contributions) Future Value = PV × (1 + r)^n (for a single lump sum)

Tax Drag Comparison: Taxable After-Tax Return = Nominal Return × (1 − Marginal Tax Rate) TFSA After-Tax Return = Nominal Return (no tax drag)

What each variable means:

• Contribution: annual deposit (subject to annual limits).
• r: annual rate of return (as a decimal).
• n: number of years invested.
• Marginal Tax Rate: your top income tax bracket; what you’d pay on investment gains in a taxable account.

Annual contribution limits (2026):

• Roth IRA (U.S.): $7,500/year, $8,600 if age 50 or over; income limits apply
• TFSA (Canada): $7,000/year; unused room carries forward
• ISA (UK): £20,000/year, unchanged since 2017

These move most years, so check the current figure with the relevant tax authority before maxing out.

Worked example: Invest $7,000/year in a tax-free account for 30 years at 7% annual return, contributing at the start of each year.

FV = $7,000 × ((1.07)^30 − 1) ÷ 0.07 × 1.07 = $7,000 × (7.6123 − 1) ÷ 0.07 × 1.07 = $7,000 × 94.461 × 1.07 = $707,511

Total contributions = $7,000 × 30 = $210,000 Tax-free growth = $707,511 − $210,000 = $497,511 in gains, none of it taxed

Run the same contributions through a taxable account at a 30% rate on gains and the return drops from 7% to 4.9%, landing at $479,565. The tax-free account ends up $227,946 ahead, which is more than the entire $210,000 you put in.

That final comparison is the whole argument. The tax drag looks small each year and compounds into something larger than the principal.