RRSP vs TFSA vs FHSA: which to fill first in 2026
Canada gives you three main tax-sheltered accounts, and most people can’t fill all of them. The right order depends on three things: whether you might buy a first home, how much you earn now compared with later, and how soon you might need the money. Here’s how they compare in 2026, with real tax savings at three incomes.
The three accounts side by side
| RRSP | TFSA | FHSA | |
|---|---|---|---|
| 2026 room | 18% of your 2025 earned income, up to $33,810, minus any pension adjustment | $7,000 for 2026; up to $109,000 in total if you’ve been eligible since 2009 | $8,000 a year, $40,000 lifetime |
| Unused room | Carries forward with no limit | Carries forward with no limit | Up to $8,000 carries forward to the next year, and only once you’ve opened the account |
| Contribution | Tax-deductible | Not deductible | Tax-deductible |
| Withdrawal | Taxed as income (except the Home Buyers’ Plan and Lifelong Learning Plan) | Tax-free, and the room comes back the next January 1 | Tax-free for a qualifying first home; otherwise taxed |
| Who can open one | Anyone with earned income and room | Canadian residents 18 or older with a SIN | Canadian residents 18 or older who are first-time home buyers |
| Over-contribution | 1% a month on excess above a $2,000 buffer | 1% a month on any excess, with no buffer | 1% a month on any excess |
Your personal limits are on your notice of assessment and in CRA My Account. Always check them before contributing; the dollar limits above are ceilings, not your own room.
What a deduction is actually worth
RRSP and FHSA contributions reduce your taxable income, so they save tax at your marginal rate. TFSA contributions don’t, but everything they earn is tax-free forever. Here is the income tax saved by an $8,000 RRSP or FHSA contribution for an Ontario employee in 2026, from our take-home pay calculator:
| Salary | Tax saved by an $8,000 deduction | Effective saving |
|---|---|---|
| $55,000 | $1,698 | 21% |
| $85,000 | $2,372 | 30% |
| $130,000 | $3,473 | 43% |
The higher your income, the more each deducted dollar is worth. That’s the heart of the RRSP-versus-TFSA question: an RRSP wins when your tax rate when you withdraw will be lower than your rate today. A TFSA wins, or ties, when your rate later will be the same or higher.
A simple order for your next dollar
- Take any employer RRSP or pension match first. A match is an instant return that nothing else beats.
- Open an FHSA if there’s any chance you’ll buy a first home. It’s the only account that is deductible going in and tax-free coming out. Open it early even if you can’t contribute much: room only starts building the year you open it. If you never buy, you can transfer the balance to your RRSP without using any RRSP room.
- If your income is high, favour the RRSP. Around the middle tax brackets and above, the deduction is worth enough that the RRSP usually comes out ahead for retirement savings. Consider investing the refund in your TFSA.
- If your income is low or you expect it to rise, favour the TFSA. A deduction at a low rate is worth less, and you can carry RRSP room forward to a higher-income year. Withdrawals from a TFSA also don’t count as income for benefits such as the Canada Child Benefit or the GST/HST credit.
- Keep short-term money in the TFSA. An emergency fund or a goal within a few years belongs where withdrawals are tax-free and the room comes back.
Buying a first home: the FHSA and RRSP together
First-time buyers can use both. The FHSA gives you up to $40,000 tax-free with nothing to repay. The RRSP Home Buyers’ Plan lets you withdraw up to $60,000 from your RRSP without tax, which you repay to your RRSP over 15 years. A couple who both qualify can combine them for up to $200,000. Repayments normally start the second year after the withdrawal; for first withdrawals made from 2022 to 2025, they start the fifth year instead, and the federal government has proposed extending that to withdrawals up to 2028. Check CRA for the rule that applies to you.
For every other program first-time buyers can use, see our guide to first-time home buyer programs in Canada.
Common mistakes
- Re-contributing a TFSA withdrawal in the same year. The room comes back on January 1 of the following year, not right away. This is the most common cause of TFSA penalties.
- Waiting to open an FHSA. Room doesn’t build until the account exists, and only $8,000 of unused room carries forward.
- Treating the RRSP refund as spending money. The refund is a tax deferral, not a gift. Investing it is what makes the RRSP work.
- Holding cash in an RRSP or TFSA for years. The shelter is only as valuable as what grows inside it.
Sources
- Canada Revenue Agency, RRSPs and related plans
- Canada Revenue Agency, Tax-Free Savings Account
- Canada Revenue Agency, First Home Savings Account
- Canada Revenue Agency, What is the Home Buyers’ Plan
This guide is general information, not financial or tax advice. The right choice depends on your full situation; for a personal plan, talk to a fee-only financial planner or tax professional.