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The RRSP, TFSA and FHSA all shelter savings from tax, in different ways. For 2026 the limits are $33,810, $7,000 and $8,000. RRSP withdrawals are taxed as income, and TFSA withdrawals aren't.
Canada gives you three main registered accounts for saving, and picking between them comes down to one question: when would you rather pay the tax? The RRSP lowers your tax now and taxes you later. The TFSA does the reverse. The FHSA is built for a first home and gets both breaks.
What separates the main accounts?
An RRSP contribution is a deduction, so it lowers this year’s tax, and what you withdraw later is taxed as income. A TFSA contribution isn’t deductible, but nothing you take out is taxed. Which one wins depends on whether your tax rate today is higher or lower than it will be when you spend the money. The CRA’s TFSA overview covers the rules.
Here’s a rough picture. Sam in Calgary puts $5,000 into an RRSP and has a 30% marginal rate, so the deduction is worth about $1,500 at tax time (5,000 x 0.30). Put the same $5,000 in a TFSA and there’s no refund, but every dollar that comes out later is yours.
Deductible RRSP and PRPP contributions can be used to reduce your income tax.
Line 20800 – RRSP deduction, canada.ca
The RRSP calculator shows what a contribution saves you, and the TFSA calculator works out your room.
What are the limits for 2026?
The RRSP dollar limit is $33,810, and your own limit is 18% of last year’s earned income up to that cap, plus unused room, minus any pension adjustment. The TFSA limit is $7,000 for the year. The FHSA allows $8,000 a year and $40,000 over its life, and unused room carries forward up to $8,000. The CRA explains how that works on its FHSA page. The limits and rates page has every figure with its source.
What happens when you take money out of an RRSP?
The bank withholds tax on the spot, outside Quebec 10% on up to $5,000, 20% on the next $10,000 and 30% above $15,000. That’s withholding, not your final bill. The whole amount is added to your income for the year, so you might owe more or get some back. Take out $12,000 and the bank holds back $1,900, yet your real tax could be higher or lower. The RRSP withdrawal tax calculator estimates it.
What changes at 71?
You can contribute until December 31 of the year you turn 71. After that the RRSP has to be closed, turned into a RRIF that pays you a minimum each year, or used to buy an annuity.
Where does your pension fit in?
They sit next to your own savings. Canada Pension Plan payments depend on what you contributed while working, and Old Age Security depends on how long you’ve lived in Canada. The CPP guide, the CPP calculator and the OAS calculator cover each, and the retirement calculator puts everything on one page.
What do people get wrong?
Treating the RRSP withholding as the final tax is the big one. Another is pulling RRSP money out in a high-income year when waiting would cost less.
More about saving and retirement
- Canadian Corporate Capital Gains Tax: Rate and Example
Canadian corporations add half of a capital gain to income. See how the taxable half, refundable tax and a $100,000 example work
- Ontario Regional Opportunities Investment Tax Credit
Private corporations get 10% back on building spending in designated regions, up to $45,000 a year, but Ontario shows the credit ending soon
- Short Term Capital Gains Tax in Canada: How It Works
Short holding periods don't change capital gains tax in Canada. See the extra tax on a $10,000 gain at four salaries in Ontario
- Free income tax filing for seniors in Canada
Seniors on a modest income can file for free. See the clinic income limits, what to bring and when software is the better route
- Business Investment Loss: What You Can Deduct
A loss on small business shares or debt can cut your tax bill. See how the ABIL works, where to claim it and what a $40,000 loss saves
- What Capital Gains Tax in Ontario Costs You in 2026
A $95,000 gain on $90,000 of pay adds $17,451 of tax. See how the capital gains half rule, Ontario rates and a home sale fit together
- Lifetime Capital Gains Exemption: Limits and Rules
The lifetime capital gains exemption was $1,250,000 for 2025. See which shares qualify, how Form T657 works and what a $1.4 million sale could cost
- Capital Gain Rate for Corporations in Canada
Half of a capital gain is taxable in a company, so $100,000 becomes $50,000. See what happens to the untaxed half and which rate applies
Frequently asked questions
Should I use my RRSP or my TFSA first?
There is no single answer. An RRSP deduction pays off most when your tax rate now is higher than it will be in retirement, while a TFSA is flexible because withdrawals are tax-free. Try both in the calculators with your own income.
What is the RRSP limit for 2026?
$33,810 is the dollar cap. Your own limit is 18% of last year's earned income up to that cap, plus unused room, minus any pension adjustment. Your notice of assessment shows it.
What tax is taken when I withdraw from an RRSP?
The bank withholds 10% on up to $5,000, 20% on $5,000 to $15,000 and 30% above that, outside Quebec. That's withholding, not the final tax, because the withdrawal is added to your income.
What happens to my RRSP at 71?
The last day to contribute is December 31 of the year you turn 71. By then you close it, turn it into a RRIF, or buy an annuity.