If you're a Canadian looking to save on taxes while growing your money, three registered accounts deserve your attention: the Tax-Free Savings Account (TFSA), the Registered Retirement Savings Plan (RRSP), and the First Home Savings Account (FHSA). Each one offers meaningful tax advantages, but they work in different ways — and the right choice depends on your income, your goals, and where you are in life.
This guide explains how each account works, compares their key features side by side, and walks you through how to decide which one makes sense for you.
To help you decide, here's a handy — and simple! — chart. All you have to do is answer a few basic questions.
What is a TFSA?
A TFSA is a registered account that lets you grow your investments and withdraw them tax-free — no matter how much they've gained in value. You don't get a tax deduction when you contribute, but you'll never pay tax on withdrawals, and there are no restrictions on when or why you take your money out.
You start building TFSA contribution space from 2009, the year you turned 18, or the year you became a resident of Canada — whichever is the most recent. The TFSA contribution limit for 2026 is $7,000.
What is an RRSP?
An RRSP is a registered account designed to help you save for retirement by deferring taxes on your income. Contributions lower your taxable income in the year you make them, and your investments grow tax-sheltered inside the account.
You pay tax when you withdraw, but the idea is that you'll do so in retirement — when your income and tax rate are typically lower. As with TFSAs, there is a contribution limit that accumulates each year if you don't use all of it.
What is an FHSA?
An FHSA is the newest registered account type, combining the benefits of an RRSP and a TFSA. Your contributions (up to $8,000 per year until you hit a total of $40,000) reduce your taxes in the year they're made, and qualifying withdrawals for a first home purchase are tax-free.
If you decide not to buy after all, you can transfer your FHSA savings to an RRSP tax-free, without affecting your RRSP contribution room.
Key differences at a glance
Each of these registered accounts offers tax advantages, but they work differently. Here's a side-by-side comparison of the most important features.
Feature | TFSA | RRSP | FHSA |
|---|---|---|---|
| Tax on contributions | No deduction | Tax-deductible | Tax-deductible |
| Tax on withdrawals | Tax-free | Taxed as income | Tax-free (for home purchase) |
| Tax on growth | Tax-free | Tax-sheltered | Tax-free |
| 2026 contribution limit | $7,000/year | 18% of income (max $33,810) | $8,000/year (max $40,000 lifetime) |
| Unused room carries forward? | Yes | Yes | Yes (up to $8,000) |
| Withdrawal restrictions | None | Taxed; room lost permanently | Must be used for first home purchase |
| Eligible investments | Stocks, bonds, ETFs, GICs, mutual funds | Stocks, bonds, ETFs, GICs, mutual funds | Stocks, bonds, ETFs, GICs, mutual funds |
How to decide which account to use
The right account depends on your income, your goals, and your tax situation. Here are some general guidelines.
If you're in a lower tax bracket
A TFSA may be more useful. Since your tax rate is already low, the RRSP deduction won't save you as much — and you could end up paying more tax when you withdraw in retirement if your income rises. A TFSA lets your money grow tax-free with no restrictions on withdrawals.
If you're in a higher tax bracket
An RRSP tends to be more advantageous. The tax deduction on contributions saves more when your marginal rate is high, and you'll ideally withdraw in retirement when your income — and tax rate — are lower.
If you're saving for your first home
An FHSA gives you the advantages of both. Your contributions are tax-deductible (like an RRSP), and qualifying withdrawals for a home purchase are tax-free (like a TFSA). You can also combine your FHSA with the Home Buyers' Plan to maximize your down payment.
If you're not sure
Many people contribute to more than one account. A common approach is to start with a TFSA for its flexibility, then add RRSP contributions as your income grows. If homeownership is a goal, opening an FHSA early lets you build contribution room while your savings grow.
Top questions about TFSAs
Do my TFSA contributions affect this year's taxes?
No. The money you put into your TFSA does not reduce your taxes owed for that year. The benefit comes when you withdraw — no matter how much your investments have grown, you pay zero taxes on withdrawals.
How many times can I withdraw from and contribute to my TFSA?
As many times as you like, as long as you are within your contribution room. When you withdraw from your TFSA, you don't get that contribution room back until January 1 of the following calendar year.
Is growth within a TFSA tax-free?
Yes. If you contribute $20,000 and your investments grow to $30,000, you can withdraw the full $30,000 without paying any taxes. On January 1 of the following year, that $30,000 is added back to your contribution room.
Can I transfer funds from my RRSP into my TFSA?
You can, but you'd need to pay taxes on the funds withdrawn, and you would lose that RRSP contribution room permanently. There could be more tax-efficient options available. Check with an advisor first.
Top questions about RRSPs
Do pension deductions or group plans affect RRSP contribution room?
If your employer has a Group RRSP, Registered Pension Plan (RPP), or Deferred Profit-Sharing Plan (DPSP), contributions from those programs count against your contribution room. Interest and dividends received don't affect contribution limits.
Are RRSP withdrawals taxed the same as regular income?
Yes. RRSP withdrawals are taxed at your marginal tax rate. Withdrawals made during a period when you have no other income would be taxed at a lower rate.
How are RRSPs handled when the account holder passes away?
This is why designating a beneficiary is important:
Spouse as beneficiary — the account can roll over tax-free into their RRSP or RRIF
Child as beneficiary — the RRSP proceeds are taxed with the estate, and the beneficiary receives the value in cash
No beneficiary — the RRSP value counts as income on the account holder's final tax return
Can I use my RRSP before retirement?
Yes, through two specific programs:
Home Buyers' Plan — withdraw up to $60,000 to buy or build a qualifying first home
Lifelong Learning Plan (LLP) — borrow up to $20,000 (max $10,000 per year) for education and training
Withdrawals outside of these plans are subject to withholding tax and count as income for the calendar year.
Top questions about FHSAs
Can I combine my FHSA and RRSP to buy a first home?
Yes. You can use your FHSA savings alongside the Home Buyers' Plan, which lets you withdraw from your RRSP for a home purchase as well.
What happens to FHSA funds I don't use to buy a house?
Unused FHSA funds can be transferred to your RRSP tax-free, without affecting your RRSP contribution room. Once the money is in your RRSP, it follows RRSP withdrawal rules — meaning you'll pay tax when you take it out.
Can I have more than one FHSA?
Yes. You can open multiple FHSAs with no tax implications, but your total contribution limit stays the same across all accounts.
Can I transfer funds from my RRSP into my FHSA?
You can, but you would not receive a deduction from the transfer, and you would lose the RRSP contribution room. Consider speaking with a financial advisor first.
The bottom line
There is no single answer to whether a TFSA, RRSP, or FHSA is the right choice — it depends on your income, your goals, and where you are in life. Many Canadians benefit from using a combination of these accounts to maximize their tax advantages and keep their savings flexible.
If you're unsure where to start, consider speaking with a financial advisor who can review your full picture and help you decide how to allocate your contributions.
