RRSP vs TFSA vs FHSA: which account first?
Canada gives you three powerful registered accounts. They are not rivals — most people should use more than one. This guide explains what each does in 2026 and the order that puts your dollars to work hardest.
The three accounts at a glance
Each account changes when your money is taxed. A TFSA is funded with after-tax dollars and everything after that — growth and withdrawals — is tax-free. An RRSP flips it: you deduct contributions now and pay tax when you withdraw. An FHSA is the rare best-of-both account for a first home: you deduct going in and withdraw tax-free for a qualifying purchase.
| Feature | TFSA | RRSP | FHSA |
|---|---|---|---|
| 2026 contribution room | $7,000/yr | 18% of earned income, max $33,810 | $8,000/yr |
| Lifetime / cumulative cap | $109,000 since 2009 | No lifetime cap | $40,000 |
| Contribution deductible? | No | Yes | Yes |
| Growth taxed? | No | No (deferred) | No |
| Withdrawal taxed? | No | Yes, as income | No, for a first home |
| Room restored after withdrawal? | Yes, next Jan 1 | No (except HBP) | No |
| Best for | Flexible goals, low earners | High earners, retirement | First-home buyers |
Limits are the 2026 figures published by the CRA. RRSP room is reduced by any pension adjustment and can be carried forward.
TFSA: tax-free, and flexible
The Tax-Free Savings Account has a $7,000 dollar limit for 2026. Room accumulates from the year you turned 18 (and were a Canadian resident), so anyone who qualified in 2009 and has never contributed has $109,000 of room today. Nothing inside is ever taxed, and there is no forced withdrawal age.
Its defining feature is flexibility: money you withdraw is added back to your room on January 1 of the following year. That makes the TFSA ideal for an emergency fund, a medium-term goal, or any saver whose current tax rate is modest. The one trap is re-contributing withdrawn money in the same year without room — that triggers a 1%-per-month over-contribution penalty.
RRSP: a tax deferral, best when your rate falls later
Your RRSP room for 2026 is 18% of your prior-year earned income, up to a ceiling of $33,810, less any pension adjustment. The contribution deadline for the 2026 tax year is March 1, 2027. You deduct contributions from taxable income now and pay tax on withdrawals later.
The RRSP works best when your marginal tax rate is higher today than it will be when you withdraw — typically higher earners and anyone expecting a lower-income retirement. Two features add flexibility for younger savers: the Home Buyers' Plan lets a first-time buyer borrow up to $60,000 from an RRSP tax-free (repaid over 15 years), and the Lifelong Learning Plan does something similar for education.
FHSA: the best of both, for a first home
The First Home Savings Account combines the RRSP's deduction with the TFSA's tax-free withdrawal — but only for a qualifying first-home purchase. You can contribute $8,000 per year up to a $40,000 lifetime maximum. Unused room carries forward, but only one year at a time, so the most you can contribute in a single year is $16,000.
Because a qualifying withdrawal is entirely tax-free, the FHSA is effectively free money for a future first home, and it stacks with the RRSP Home Buyers' Plan on the same purchase. An FHSA must be closed by the end of the 15th year after opening, or by the year you turn 71; if you do not buy a home, the balance can roll into your RRSP without using RRSP room.
The "which first" framework
There is no single right answer, but a reliable priority order for most Canadians looks like this:
| Order | Account | Why it comes here |
|---|---|---|
| 1 | FHSA (if buying a first home) | Deduction now and tax-free withdrawal — no other account does both |
| 2 | RRSP up to employer match | An employer match is an instant 50–100% return |
| 3 | RESP (if you have kids) | The 20% CESG adds up to $500 a year of free federal grant |
| 4 | TFSA or RRSP | Whichever fits your marginal rate — see below |
For step 4, compare your marginal tax rate today against your expected rate in retirement. In the 2026 federal system the first bracket is taxed at 14% up to $58,523 and the top rate reaches 33% above $258,482, and your province adds its own layer. As a rule of thumb:
- Higher rate now than later → favour the RRSP (deduct at a high rate, withdraw at a low one).
- Lower rate now, or unsure → favour the TFSA (pay a low rate today, never again).
- Want access before retirement → favour the TFSA for its restored room.
RESP: don't leave the grant on the table
If you have children, the RESP deserves a spot near the top. Contributions are not deductible, but the Canada Education Savings Grant pays 20% on the first $2,500 you contribute each year — up to $500 annually and $7,200 per child over their lifetime. The lifetime contribution limit is $50,000 per beneficiary. No investment account matches a guaranteed 20% top-up, which is why the grant is worth capturing before adding extra to a TFSA or RRSP.
Use the calculators
Put your own numbers to the framework above:
Sources
Common questions
Which registered account should I fill first in 2026?
If you are saving for a first home, start with the FHSA — you get a deduction going in and a tax-free withdrawal coming out. Next, contribute enough to your RRSP to capture any employer match, because that match is an immediate return. After that, choose between TFSA and RRSP based on your marginal tax rate: RRSP wins when your rate is higher now than it will be in retirement, and the TFSA wins when it is lower or you want flexible access. If you have children, an RESP earns a 20% federal grant (up to $500 a year) that no other account matches.
How much can I contribute to each account in 2026?
The 2026 TFSA dollar limit is $7,000, so someone who was 18 or older in 2009 and has never contributed has $109,000 of cumulative room. The RRSP limit is 18% of your prior-year earned income, capped at $33,810 for 2026, minus any pension adjustment. The FHSA allows $8,000 per year up to a $40,000 lifetime maximum. All three have separate room, so you can use them in the same year.
Can I use the FHSA and the RRSP Home Buyers' Plan together?
Yes. Since 2024 you can combine an FHSA withdrawal with the RRSP Home Buyers' Plan for the same home purchase. The FHSA gives a deduction on the way in and a tax-free withdrawal on the way out, while the Home Buyers' Plan lets you take up to $60,000 from your RRSP as an interest-free loan you repay over 15 years. Stacking both can free up a large down payment for a first home.
Do TFSA withdrawals give my contribution room back?
Yes, but not immediately. Any amount you withdraw from a TFSA is added back to your contribution room on January 1 of the following year. If you take money out and re-contribute it in the same calendar year without unused room, you can trigger an over-contribution penalty of 1% per month. RRSP and FHSA withdrawals work differently and generally do not restore room.