Guide for Families Building Wealth
TFSA vs RRSP vs FHSA: three accounts, three jobs
The registered account comparison Ontario families ask for most, with the current limits labelled by year.
Three registered accounts, three different jobs. The TFSA is the flexible one, the RRSP is the retirement deduction machine, and the FHSA is the first home specialist. Most Ontario families use more than one, in an order that depends on income today, income expected in retirement, and whether a first home is in the picture.
The comparison
| Question | TFSA | RRSP | FHSA |
|---|---|---|---|
| Purpose | Any goal: emergencies, big purchases, or retirement top ups. | Retirement savings, with a side door for a first home (Home Buyers' Plan) and education (Lifelong Learning Plan). | Saving for a qualifying first home. |
| Eligibility | Canadian resident, age 18 or older (age of majority in Ontario for most providers), with a valid SIN. No income needed. | Anyone with earned income and a filed tax return, up to the end of the year you turn 71. | Canadian resident, age 18 or older, a first time home buyer who did not own and live in a qualifying home in the current year or the previous four calendar years (you and your spouse or partner, per the CRA rules). |
| How room is created | A new dollar amount each year: $7,000 for 2025 and $7,000 for 2026. Room starts at age 18 and accumulates whether or not you open an account. Someone eligible since 2009 who has never contributed had $102,000 of room in 2025, and $109,000 in 2026. | 18% of the previous year's earned income, up to $32,490 for 2025 and $33,810 for 2026, plus unused room carried forward, minus any pension adjustment. | $8,000 per year once you open the account, to a lifetime maximum of $40,000. Room only starts when the account is opened, and up to $8,000 of unused room carries forward, so the most you can contribute in one year is $16,000. |
| Tax on the way in | Contributions are made with after tax dollars. No deduction. | Contributions are tax deductible, in the year you contribute or a later year if you choose to carry the deduction forward. | Contributions are tax deductible, like an RRSP, and the deduction can also be carried forward to a higher income year. |
| Tax while it grows | Growth and income inside the account are never taxed in Canada. | Growth is sheltered while it stays in the plan. | Growth is sheltered while it stays in the account. |
| Tax on the way out | Withdrawals are completely tax free and do not affect income tested benefits like OAS. | Withdrawals are taxed as regular income in the year you take them, with withholding tax at source on lump sums. The strategy is deducting at a high rate now and withdrawing at a lower rate later. | A qualifying withdrawal to buy a first home is completely tax free, the deduction on the way in and no tax on the way out. Non qualifying withdrawals are taxable. |
| Withdrawal and room rules | Withdraw any amount, any time. Withdrawals are added back to your room on January 1 of the following year. | Withdrawals do not restore room (outside the Home Buyers' Plan and Lifelong Learning Plan repayment rules). The plan must be converted to a RRIF or annuity by the end of the year you turn 71. | The account must be closed by the end of the 15th year after opening, or the year you turn 71, whichever comes first. If you do not buy a home, the balance can be transferred to an RRSP or RRIF tax free, without using RRSP room. |
| Spousal and estate notes | No spousal TFSA, but you can give your spouse money to contribute to their own TFSA with no attribution. Naming your spouse as successor holder lets the account continue in their name at death, outside your estate. | Spousal RRSPs let the higher income spouse contribute to a plan the other spouse will draw from, subject to the three year attribution rule on withdrawals. A spouse can generally roll an RRSP to their own plan tax free at death. | Each spouse or partner can have their own FHSA, so a couple can shelter up to $80,000 of contributions plus growth. At death, an FHSA can generally transfer to a spouse's FHSA or RRSP on a tax deferred basis if they are named beneficiary and qualify. |
| Watch outs | Overcontributions are taxed 1% per month on the excess. Day trading or carrying on a business inside a TFSA can make the income taxable. | Overcontributions above the $2,000 cushion are taxed 1% per month. Withdrawing in a high income year can cost more tax than the deduction saved. | Contributions beyond your FHSA room are taxed 1% per month on the excess. The home must be a qualifying home in Canada that you intend to live in, with a written agreement by the deadline in the rules. |
Annual figures labelled by year: TFSA $7,000 (2025 and 2026, CRA), RRSP dollar limit $32,490 (2025) and $33,810 (2026, CRA), FHSA $8,000 per year and $40,000 lifetime (statutory, unchanged since the account launched in 2023).
Check the rest of your plan, too
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How families usually sequence them
There is no universal order, but the logic is consistent. If a first home is a real goal, the FHSA usually earns its place early because it is the only account that gives a deduction going in and a tax free withdrawal coming out. The TFSA is the workhorse for flexibility and for anyone whose income today is lower than it will be later, because its withdrawals never add to taxable income. The RRSP does its best work when contributions are deducted at a high marginal rate and withdrawals land in lower rate years, and it is also where employer matching, if you have it, should never be left on the table. Business owners add one more layer: salary creates RRSP room, dividends do not, which is part of the salary vs dividends decision.
Talk it through with Sean
Every situation has its own numbers. A free 30 minute conversation is the place to look at yours, with no obligation and no pressure.
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Methodology, assumptions, and sources
This page states the program rules as published by the Canada Revenue Agency for 2025 and, where released, 2026. The TFSA annual dollar limit is $7,000 for both 2025 and 2026, and cumulative room figures assume eligibility from age 18, Canadian residency throughout, and no prior contributions or withdrawals; your personal TFSA room is confirmed only through CRA My Account, because residency changes and provider reporting can differ from estimates. The RRSP dollar limits are the CRA's published maximums and are always the lesser of 18% of earned income and the dollar limit, plus carry forward room. FHSA rules shown are the statutory limits and the CRA's first time home buyer definition. Individual eligibility can turn on details these summaries cannot cover, including residency, attribution rules, and pension adjustments. This page is education, not tax or financial advice.
Sources: Canada Revenue Agency, TFSA contributions and the TFSA dollar limit; Canada Revenue Agency, RRSP deduction limits; Canada Revenue Agency, First Home Savings Account (FHSA) pages; Government of Canada, FHSA program overview. Figures verified October 2026.
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