- 2026 limits: RRSP $33,810, TFSA $7,000, FHSA $8,000 a year.
- RRSP wins when your tax rate now is higher than your rate in retirement; TFSA wins when it is lower.
- The FHSA is the strongest account for a first home: deductible in, tax-free out.
RRSP, TFSA and FHSA are three different ways to shelter savings from tax. The right choice depends mostly on two things: your tax rate now, and the tax rate you expect to pay when you take the money out.
2026 limits
| Account | Limit | Tax treatment |
|---|---|---|
| RRSP | 18% of last year's earned income, up to $33,810, plus unused room | Contributions are deductible; withdrawals are taxed as income |
| TFSA | $7,000 a year; $109,000 total if you have been eligible since 2009 | No deduction; growth and withdrawals are tax-free |
| FHSA | $8,000 a year, $40,000 lifetime | Contributions are deductible and qualifying home withdrawals are tax-free |
The core difference
An RRSP gives you the tax break now and taxes the withdrawal later. A TFSA does the opposite. If your marginal rate today is higher than your rate in retirement, the RRSP tends to win. If it is lower or the same, the TFSA tends to win or tie. When rates are equal and the refund is reinvested, the two give the same result.
BC decision guide
- Income under about $50,363: the combined marginal rate is under 25%, and between $25,570 and $44,950 an RRSP deduction also restores part of the tax reduction credit. A TFSA is often better if you may need the money before retirement.
- Income between about $58,523 and $100,728: marginal rate of about 28%. RRSP is usually attractive if your retirement income will be lower.
- Income above $117,045: marginal rates of 38% and up. RRSP deductions are most valuable here.
- Saving for a first home: the FHSA combines the RRSP deduction with tax-free withdrawal for a qualifying purchase.
Worked example
A BC worker earns $90,000 (marginal rate 28.2%) and puts $10,000 a year into an RRSP for 25 years at 6%, expecting a 25% tax rate in retirement. The RRSP grows to about $548,645, or about $411,484 after tax. The alternative is a TFSA funded with the same after-tax cost, $7,180 a year, which grows to about $393,927. The RRSP wins because the retirement rate (25%) is lower than today's rate. Change the retirement rate to 30% and the TFSA pulls ahead.
These figures assume the RRSP refund is reinvested or spent against the TFSA's higher cost, a constant return, and that you have the contribution room. They ignore the OAS clawback, income-tested benefits and provincial credits that may apply in retirement.
Don't forget the FHSA
A first-time buyer can contribute $8,000 a year to the FHSA. Contributions are deductible, and growth and qualifying withdrawals are tax-free. Unused FHSA room carries forward by up to $8,000. If you do not buy, the balance can be transferred to an RRSP without using RRSP room. In BC you can pair it with the first-time home buyers' property transfer tax exemption: see our property transfer tax guide.
Run your own numbers in the RRSP vs TFSA vs FHSA calculator.
Frequently asked questions
Can I contribute to an RRSP and a TFSA in the same year?
Yes. Each account has its own room.
What happens to unused RRSP room?
It carries forward indefinitely.
Is the FHSA better than the RRSP Home Buyers' Plan?
They can be used together. The FHSA withdrawal is tax-free and does not need to be repaid.
Which account should I fill first?
Compare your marginal rate now with the rate you expect in retirement, then consider whether you may need the money before retirement (TFSA is more flexible).
Sources
- CRA — Canadian income tax rates for individuals
- Canada Revenue Agency
- Government of BC — Personal income tax rates