TFSA vs RRSP vs FHSA
TFSA, RRSP or FHSA? All three let savings grow without yearly tax, but they treat contributions, withdrawals and lost room very differently. This guide explains how each works under CRA’s rules, which to fund first for a home, retirement or an emergency fund, and the deadlines and penalties that trip people up.
Rules checked October 14, 2026 on canada.ca
The three accounts side by side
| Question | TFSA | RRSP | FHSA |
|---|---|---|---|
| Who can open? | Canadian resident, 18+, valid SIN | No CRA minimum age; room comes from earned income; contribute until Dec 31 of the year you turn 71 | Canadian resident, 18 to 71, first-time home buyer |
| 2026 contribution limit | $7,000 | 18% of 2025 earned income, up to $33,810 (minus pension adjustments) | $8,000 a year, $40,000 lifetime (the amounts CRA currently lists) |
| Unused room carries forward? | Yes, all unused room | Yes, all unused deduction room | Up to $8,000 into the next year |
| Contributions tax-deductible? | No | Yes | Yes (RRSP transfers in are not) |
| Investment growth taxed? | No | Not while in the plan; taxed when withdrawn | No, if used for a qualifying home |
| Withdrawals taxable? | No | Yes; 10% to 30% withheld outside Quebec | No for a qualifying home purchase; otherwise yes |
| Room comes back after a withdrawal? | Yes, on January 1 of the next year | Generally no; you need new room to put money back (HBP and LLP are repaid instead) | No for a home withdrawal; taxable withdrawals can create re-participation room |
| Deadline for 2026 contributions | Any time in the calendar year (Dec 31, 2026) | March 1, 2027 (60 days after year end; CRA has not posted the date yet) | Dec 31, 2026 (no 60-day window) |
| Over-contribution penalty | 1% per month on the highest excess | 1% per month on excess over a $2,000 buffer | 1% per month on the highest excess |
| Use for a home purchase | Withdraw any time, for any reason, tax-free | Home Buyers' Plan: up to $60,000, repaid over 15 years | Tax-free qualifying withdrawal, no repayment; can combine with HBP |
| What happens at 71? | Nothing; CRA’s TFSA pages list no maximum age | By Dec 31 of the year you turn 71: cash out, move to a RRIF, or buy an annuity | Must close by Dec 31 of the year you turn 71 (or sooner at 15 years or the year after a home withdrawal); can move to an RRSP or RRIF tax-deferred |
| Eligible investments | Cash, GICs, bonds, mutual funds, listed stocks and ETFs | Same types as a TFSA | Same types as an RRSP and TFSA |
| Best for | Flexible tax-free saving for any goal, including emergencies | Retirement saving, especially when your tax rate now is higher than it will be in retirement | First-time buyers saving for a down payment |
WHERE TO OPEN ONE
Rules from the Canada Revenue Agency, checked 2026-10-14. Limits change each year.
If you qualify as a first-time buyer, the FHSA generally comes first. Otherwise the TFSA is the flexible default, and the RRSP tends to pay off most when your tax rate now is higher than in retirement.
Suits you if
- You want an emergency fund you can tap any time, tax-free.
- You have little or no earned income to create RRSP room.
- You rely on federal income-tested benefits like the GIS or CCB.
Look elsewhere if
- You’re a first-time home buyer who qualifies for an FHSA.
- You have high income now and expect less in retirement.
- You want a deduction now and won’t need the money soon.
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What to know before you choose
How each account works
TFSA. Open to residents of Canada who are 18 or older with a valid SIN. Contributions aren’t deductible, but CRA says growth and withdrawals are generally tax-free, and you don’t need earned income to contribute. The 2026 dollar limit is $7,000, and unused room carries forward.
RRSP. Built for retirement. Contributions are deductible up to a limit CRA generally sets at 18% of the previous year’s earned income, capped at $33,810 for 2026, minus any pension adjustment, plus unused room. Growth isn’t taxed while it stays in the plan, but withdrawals are generally taxed as income. Contributions stop after December 31 of the year you turn 71.
FHSA. For first-time home buyers who are residents of Canada, at least 18, and 71 or younger at the end of the year they open it. Contributions are generally deductible, and a qualifying withdrawal for a first home is tax-free with nothing to repay. CRA currently lists $8,000 of room a year and a $40,000 lifetime limit, and room only starts once you open your first FHSA.
Which account to use first
CRA doesn’t rank the accounts, and the right order depends on your goals and income. These general patterns follow from the rules.
- Saving for a first home: if you qualify, the FHSA usually comes first, since it pairs a deduction going in with a tax-free qualifying withdrawal coming out. A TFSA can hold savings beyond your FHSA room.
- Higher income now: the RRSP deduction generally counts for more when your tax rate today is higher than you expect in retirement.
- Lower income: RRSP room comes from earned income, so it may be small. A TFSA needs no earned income, and CRA says TFSA withdrawals don’t affect federal income-tested benefits.
- Retirement: the RRSP is designed for it, and a TFSA works alongside it. CRA’s TFSA pages set a minimum age of 18 but list no maximum age.
- Emergency fund: the TFSA is the usual favourite. Withdrawals are tax-free and return to your room the next January 1, while RRSP withdrawals are taxed and the room generally doesn’t come back.
Using the FHSA and Home Buyers’ Plan together
CRA says you can make a qualifying FHSA withdrawal and an RRSP withdrawal under the Home Buyers’ Plan (HBP) for the same qualifying home, as long as you meet the conditions at the time of each. Two buyers, including spouses, can each use their own FHSAs for the same home.
The big difference is repayment. FHSA qualifying withdrawals never go back in. HBP withdrawals are capped at $60,000 per participation period and must be repaid to your RRSP over up to 15 years, and any shortfall on a year’s minimum repayment is added to your income. CRA’s main HBP page says first withdrawals from 2026 to 2028 start repaying in the fifth year after the first withdrawal (2031 for a 2026 withdrawal), though its separate repayment page hadn’t caught up when we checked.
- You need a written agreement to buy or build a qualifying home in Canada. For the HBP, a pre-approved mortgage doesn’t count.
- The home generally has to be bought or built before October 1 of the year after the withdrawal.
- You must intend to live in it as your principal residence within one year.
- For the FHSA, give your issuer Form RC725. A qualifying withdrawal can’t be cancelled.
- RRSP contributions made in the 89 days before an HBP withdrawal may not be deductible.
Withdrawals and getting room back
This is where the three accounts differ most.
- TFSA: withdraw any time, tax-free. The amount comes back as room on January 1 of the next year, not right away, so putting it back in the same year can create an excess.
- RRSP: a regular withdrawal is taxable income. Your institution withholds 10% up to $5,000, 20% over $5,000 up to $15,000 and 30% above that (lower federal rates in Quebec, where provincial tax is also withheld), which may not cover your full bill. CRA’s guidance indicates that putting a regular withdrawal back needs available room, so the room used is generally gone.
- FHSA: a qualifying withdrawal for your first home is tax-free and isn’t repaid. A taxable withdrawal is added to your income, and CRA says the portion that did not reduce or eliminate an excess FHSA amount is added back as re-participation room.
- Moving money between accounts: direct transfers between TFSAs, from an RRSP to an FHSA (Form RC720) or from an FHSA to an RRSP or RRIF (Form RC721) avoid immediate tax. Withdrawing and depositing it yourself counts as a withdrawal plus a new contribution.
Deadlines and over-contribution penalties
TFSA and FHSA contributions run on the calendar year, so the 2026 deadline is December 31, 2026, with no 60-day window.
The RRSP is different. CRA’s rule is that contributions in the first 60 days of the next year can count for the previous tax year. By that rule, the 2026 tax year window ends on March 1, 2027, but CRA hasn’t posted the date yet, so confirm it on CRA’s important dates page.
Check your room in CRA My Account before contributing, but note the TFSA figures there are updated only once a year in the spring, so track recent transactions yourself. Each account charges 1% a month on excess contributions:
- TFSA: 1% per month on the highest excess. Withdraw it quickly, file Form RC243 and pay by June 30 of the following year. Deliberate over-contributions can face the 100% advantage tax.
- RRSP: 1% per month on unused contributions more than $2,000 over your deduction limit. The $2,000 buffer generally applies only if you were 18 or older in the previous year. File Form T1-OVP within 90 days after the year ends.
- FHSA: 1% per month on the highest excess until new room on January 1 or a designated withdrawal or transfer clears it. A qualifying withdrawal doesn’t reduce an excess. File Form RC728 by June 30 of the following year.
What you can hold inside them
Each account is a container, not an investment. CRA says all three can generally hold the same qualified investments: cash, GICs, bonds, mutual funds and most securities listed on a designated stock exchange, including listed stocks and ETFs. Issuers may limit what they offer, so a deposit account at a bank or credit union may hold only cash and GICs.
Match the holdings to when you need the money. A savings account or GIC often suits a down payment or emergency fund you will tap soon, while an investing platform lets you hold ETFs and stocks for longer goals like retirement.
- TFSA losses are never added back as room, and capital losses inside an RRSP aren’t deductible.
- CRA may deregister a TFSA and tax its income as business income if you trade with the frequency and experience of a professional.
- Prohibited investments, such as a stake of 10% or more in a company you are closely connected to, face heavy taxes.
Mistakes to avoid
Most costly errors come from timing and paperwork, not investment picks.
- Putting a TFSA withdrawal back in the same year without spare room.
- Waiting to open an FHSA. Room only starts once your first FHSA is open, though opening also starts the 15-year clock.
- Skipping Schedule 15, which CRA requires with your return for the year you open your first FHSA, even with no contributions.
- Withdrawing from an FHSA and depositing into an RRSP yourself instead of using a direct transfer, which makes it a taxable withdrawal that uses RRSP room.
- Leaving money in an FHSA after its participation period ends, when its value on December 31 is added to your income.
- Contributing to a TFSA after becoming a non-resident, which costs 1% for each month the contribution stays in.
Frequently Asked Questions
Can I have a TFSA, RRSP and FHSA at the same time?
Yes. Each account has its own room and rules, and CRA’s rules let them work together: you can transfer from an RRSP to an FHSA, move unused FHSA savings to an RRSP, and use the FHSA and Home Buyers’ Plan for the same home. You still need to meet each account’s own eligibility rules, such as being a first-time home buyer for the FHSA.
Should I save for a down payment in a TFSA or an FHSA?
If you qualify, the FHSA generally comes first, because contributions are deductible and a qualifying withdrawal for your first home is tax-free with nothing to repay. A TFSA has no deduction but lets you withdraw for any reason, so it can hold savings beyond your FHSA room or money you might need for something else. Many buyers use both.
How much can I contribute to my FHSA in 2026?
CRA currently lists $8,000 of participation room in the year you open your first FHSA, within a $40,000 lifetime limit. Up to $8,000 of unused room carries into the next year, and CRA’s own example shows $16,000 of room in the year after a year with no contributions. Contributions for 2026 must be made by December 31, 2026.
What happens to my FHSA if I don’t buy a home?
Your FHSA participation period ends on December 31 of the year of the earliest of three events: the 15th anniversary of opening your first FHSA, turning 71, or the year after your first qualifying withdrawal. If you don’t buy, CRA says you can transfer the money directly to your RRSP or RRIF with Form RC721 without immediate tax and generally without using RRSP room, or take it out as a taxable withdrawal. Anything left after the period ends loses its FHSA status, and its value is added to your income.
Can I use the FHSA and the Home Buyers’ Plan for the same home?
Yes. CRA says you can make a qualifying FHSA withdrawal and an HBP withdrawal from your RRSP for the same qualifying home, as long as you meet all the conditions at the time of each withdrawal. The FHSA money doesn’t need to be repaid, while HBP withdrawals of up to $60,000 must be repaid to your RRSP over up to 15 years.
How much can I put in my RRSP for 2026?
CRA generally sets your 2026 deduction limit at 18% of your 2025 earned income, up to the 2026 dollar limit of $33,810, minus any pension adjustment, plus unused room carried forward from earlier years. Your exact figure is on your latest notice of assessment, Form T1028 or CRA My Account. Unused contributions more than $2,000 over your limit are generally taxed at 1% a month.
When is the RRSP deadline for the 2026 tax year?
CRA’s rule is that the contribution year runs through the first 60 days of the next year. By that rule, the deadline for the 2026 tax year ends on March 1, 2027. CRA hasn’t posted the 2026 date on its important dates page yet, so check there before you count on it. The 2025 tax year deadline was March 2, 2026.
How much TFSA room do I have if I’ve never contributed?
If you were 18 or older and a resident of Canada every year since 2009, the annual limits add up to $109,000 through 2026, by our own count of CRA’s limits. Room builds even if you never opened a TFSA, but it only starts in the year you turn 18 or become a resident. Confirm your figure in CRA My Account, keeping in mind the TFSA information there is updated only once a year.
Can I put money back into my TFSA after a withdrawal?
Yes, but generally not until January 1 of the next year, when the amount you withdrew is added back to your room. If you re-contribute in the same year without enough unused room, the excess is taxed at 1% per month. To move money between TFSAs, ask the receiving institution for a direct transfer, which doesn’t affect your room.
Is it better to pay off debt or contribute to an RRSP?
CRA doesn’t answer this, and the right choice depends on your interest rates and tax situation, so it may be worth speaking with a qualified advisor. What CRA’s rules do say: RRSP contributions are deductible up to your limit, unused room carries forward so waiting doesn’t lose it, and interest on money borrowed to contribute isn’t deductible. Withdrawing from an RRSP later to pay debt adds the amount to your taxable income.
Do TFSA withdrawals affect government benefits?
CRA says income earned in a TFSA and withdrawals don’t affect federal income-tested benefits and credits, including Old Age Security, the Guaranteed Income Supplement, Employment Insurance, the Canada child benefit, the Canada workers benefit and the GST credit. That statement covers federal programs, so check provincial programs separately.
Can I move money from my RRSP to my FHSA?
Yes. CRA allows direct transfers from an RRSP to an FHSA using Form RC720, up to your unused FHSA participation room, with no immediate tax. The transfer isn’t deductible, counts toward your $40,000 lifetime FHSA limit, and doesn’t restore the RRSP room you originally used.
Can I open an FHSA if my spouse already owns a home?
It depends on where you’ve lived. To open an FHSA, CRA’s first-time home buyer test asks whether you lived, as your principal residence, in a home owned by you or your current spouse or common-law partner at any time in the current year or the previous four calendar years. The test for a qualifying withdrawal later is different and looks only at homes you owned or jointly owned.
What happens to my RRSP, FHSA and TFSA when I turn 71?
December 31 of the year you turn 71 is the last day to contribute to your own RRSP, and by then it must be withdrawn, moved to a RRIF or used to buy an annuity. An FHSA must also close by December 31 of the year you turn 71 if it hasn’t already. CRA’s TFSA pages set a minimum age of 18 but list no maximum age, so a TFSA can generally keep going.
General information from the Canada Revenue Agency, not tax advice. Your own room and limits are in CRA My Account. See our methodology.