TFSA vs RRSP vs FHSA (2026): Which to Fund First, by Salary
Buying a first home? FHSA first: a deduction going in and no tax coming out. Then compare the RRSP refund now with the tax later. In Ontario, from about $75,000 of salary the RRSP refund beats the tax on a typical retirement withdrawal; below that, the TFSA usually wins.
All three accounts shelter investments from tax while the money is inside. They differ in when you pay it: the TFSA taxes the money before it goes in, the RRSP when it comes out, and the FHSA never, if it buys a first home. Choosing between them is mostly a question of which of those moments has the lower tax rate.
Side by side
| TFSA | RRSP | FHSA | |
|---|---|---|---|
| Deduction when you contribute | No | Yes | Yes |
| Tax when you withdraw | None | Taxed as income | None, for a first home |
| 2026 limit | $7,000 | 18% of last year's earned income, to $33,810 | $8,000 a year |
| Lifetime limit | None | None | $40,000 |
| Unused room | Carries forward forever | Carries forward forever | Up to $8,000 carries to next year |
| Withdrawals restore room | Yes, next 1 January | No | No |
| Counts as income for benefits | No | Yes | No, for a first home |
| Best for | Flexibility, lower brackets | High earners now, lower later | First-time buyers |
TFSA or RRSP: the refund now against the tax later
An RRSP contribution is deducted at your marginal rate today and taxed at your marginal rate when it comes out. A TFSA contribution is neither. So the RRSP wins exactly when the first rate is higher than the second, and by how much.
Computed from our 2026 federal and Ontario tables, income tax only, since an RRSP deduction does not reduce CPP or EI. The withdrawal is taxed on top of $50,000 of other retirement income, before the age amount and pension credit, which would lower it slightly.
On $55,000 the refund is $1,950, less than the $2,251 you would pay to take it out later, so a TFSA leaves you better off. On $130,000 the refund is $4,341, and the RRSP wins by $2,089. Expect a retirement income higher than $50,000, from a defined-benefit pension for example, and the withdrawal tax rises, which moves the crossover up.
Why the two rates are all that matters
Take $10,000 of salary at $100,000 in Ontario and let it grow 2.5 times. Through a TFSA, tax comes off first, leaving $6,942 to invest, which grows to $17,354, all yours. Through an RRSP the whole $10,000 goes in and grows to $25,000, and withdrawing it on top of $50,000 of retirement income costs $6,699 of tax, leaving $18,301. The gap between the two results comes entirely from the different tax rates at each end: had they been equal, the refund would have exactly paid the tax on the way out and the results would match.
That example assumes the refund is invested. An RRSP refund that is spent turns the RRSP into the worse account at almost any salary, which is why a TFSA is often the better choice for someone who knows they would spend it.
What tilts it toward the TFSA
RRSP and RRIF withdrawals are income, and income reduces the Guaranteed Income Supplement and, at higher levels, Old Age Security. TFSA withdrawals count toward neither. A lower-income saver who expects those benefits in retirement can lose more to the benefit reductions than the tax rates show, which is the strongest case for a TFSA. Flexibility matters too: a TFSA withdrawal returns as room the next January, an RRSP withdrawal never does.
The FHSA beats both, for a first home
The FHSA takes the RRSP's deduction and the TFSA's tax-free withdrawal, for a first home. On a $75,000 salary in Ontario, an $8,000 contribution returns $2,372 in tax now and comes out untaxed for the purchase. Neither of the others offers both.
The rules: $8,000 a year to $40,000 lifetime, with up to $8,000 of unused room carried into the next year, so a late starter can put in $16,000 in one year. Room only starts once you open the account, so opening one early, even with nothing in it, starts the clock. If the home never happens, the balance moves to an RRSP without using RRSP room. The account must close by the end of whichever comes first: the year of the 15th anniversary of opening it, the year you turn 71, or the year after your first withdrawal for a home.
The FHSA and the RRSP Home Buyers' Plan, which lends you up to $60,000 of your own RRSP for 15 years, can both be used for the same home. The first-time home buyer guide shows how they stack with the other programs.
The order that works for most people
- Any employer RRSP or pension match. A 50% or 100% instant return beats everything else here.
- High-interest debt. Clearing a 20% credit card is a guaranteed 20% return; the card payoff calculator shows what it costs to wait.
- FHSA, if a first home is possible. See the FHSA calculator.
- TFSA or RRSP, by the comparison above. Find your marginal rate with the income tax calculator, size a contribution with the RRSP calculator, and check room with the TFSA calculator.
- RESP, if you have children: the federal grant adds 20% of the first $2,500 a year. See the RESP calculator.
For the limits in detail, see TFSA contribution limit and RRSP contribution limit. For what to hold inside them, long-horizon growth benefits most from shelter; the compound interest calculator shows what regular contributions become, and a GIC inside a TFSA keeps short-term interest tax-free.
Frequently asked questions
Should I contribute to a TFSA or RRSP first?
Compare the RRSP refund now with the tax you would pay taking the money out. On $75,000 or more in Ontario, deducting $10,000 saves more than the $2,251 you would pay withdrawing it on top of a $50,000 retirement income, so the RRSP wins. Below that, the TFSA usually does.
Is the FHSA better than an RRSP or TFSA?
For a first home, yes. It is the only account that gives a deduction going in and tax-free withdrawals coming out. If you never buy, you can move the balance to an RRSP without using RRSP room, so there is little downside to opening one.
What are the 2026 TFSA, RRSP and FHSA limits?
TFSA $7,000, RRSP 18% of your previous year's earned income up to $33,810, and FHSA $8,000 a year to a lifetime $40,000. Unused TFSA and RRSP room carries forward without limit; unused FHSA room carries forward up to $8,000.
Is the FHSA better than the RRSP Home Buyers' Plan?
Yes, and you can use both for the same home. An FHSA withdrawal for a first home is never repaid. A Home Buyers' Plan withdrawal of up to $60,000 is borrowed from your RRSP and must be repaid over 15 years, or the shortfall is added to your income.
Does an RRSP really beat a TFSA if my tax rate stays the same?
No, they come out identical. With the same tax rate going in and coming out, the RRSP refund exactly pays the tax on withdrawal. The RRSP only wins if your rate falls, and only if you invest the refund rather than spend it.
Why might a TFSA be better for a lower-income retiree?
RRSP and RRIF withdrawals count as income, and income-tested benefits such as the Guaranteed Income Supplement and Old Age Security are reduced as income rises. TFSA withdrawals do not count, so a retiree expecting to receive those benefits keeps more from a TFSA than the tax rates alone suggest.
What happens to my FHSA if I never buy a home?
You can transfer it to an RRSP or RRIF tax-free without using any RRSP room. The account has to be closed by the end of the year of its 15th anniversary or the year you turn 71, whichever comes first.
Related guides
Fill your TFSA for ten years and the order the returns arrive in moves the ending balance by $69,348 on identical contributions. On a lump sum it changes nothing, which is the control that proves it.
The third year at $7,000. Anyone 18 and resident since 2009 who has never contributed has $109,000 of room, it never expires, and no income test applies.
Among Canadians holding registered retirement savings the median runs from $15,000 under 35 to $120,000 at 55 to 64. About a third hold none, and Canada leads the US on that measure in every comparable age band.
The 2026 dollar limit is $33,810, but the rule that binds most people is 18% of last year's earned income. You needed $187,833 of 2025 income for the headline figure to apply to you.
Researching and writing about Canadian personal finance since 2026.
Last reviewed October 2026 · How we research
“TFSA vs RRSP vs FHSA (2026): Which to Fund First, by Salary.” Vault Nerd, https://www.vaultnerd.com/ca/learn/tfsa-vs-rrsp-vs-fhsa, updated October 2026.
- Canada Revenue Agency: 2026 TFSA dollar limit and contribution rules
- Canada Revenue Agency: 2026 RRSP dollar limit of $33,810
- Department of Finance Canada: FHSA limits of $8,000 a year and $40,000 lifetime, and the $60,000 Home Buyers' Plan limit
- 2026 federal and Ontario tax brackets, KPMG consolidated rate table
No product is reviewed on this page and Vault Nerd has no affiliate relationship in this category. Figures checked October 2026.