RRSP vs. TFSA vs. FHSA in 2026: Which Account Should You Fund First?

For most Canadians in 2026, the answer depends on one question: are you saving for a first home? If you are, fund the First Home Savings Account (FHSA) first, because it gives you a tax deduction going in and a tax-free withdrawal coming out. If you aren’t, the RRSP usually wins when your income is high now and likely lower in retirement, and the TFSA wins when your income is modest or you need flexible access to the money.

All three accounts shelter investment growth from tax. The differences are in how much you can put in, whether you get a deduction, and what happens when you take money out.

How do the RRSP, TFSA and FHSA compare?

The limits come from the CRA’s annual limits table. Keep in mind that the federal budget is scheduled for November 5, 2026, and could change some of these rules.

How much can you contribute to an RRSP in 2026?

Your new RRSP room for 2026 is the lesser of 18% of your 2025 earned income or $33,810, minus any pension adjustment from a workplace plan, plus unused room carried forward. To get the full $33,810, you’d need roughly $187,800 of earned income in 2025. The CRA explains the formula in detail, and your exact figure appears on your latest notice of assessment.

Contributions made in the first 60 days of 2027 can be deducted on your 2026 return. That deadline is expected to be Monday, March 1, 2027, but the CRA hadn’t confirmed it when we wrote this. The 2027 dollar limit has already been published at $35,390.

The RRSP deduction is worth the most when your marginal rate is high. You pay tax later, when you withdraw, ideally at a lower rate in retirement. You also don’t have to claim the deduction in the year you contribute. Carrying it forward to a higher-income year can be smart. Our RRSP tax savings calculator shows the refund at your income level.

How much TFSA room do you have in 2026?

The annual TFSA limit is $7,000 for 2026. Room accumulates from the year you turn 18 (or 2009, when TFSAs began), and unused room carries forward indefinitely. Someone who has been eligible since 2009 and never contributed has $109,000 of room in 2026.

There’s no deduction, but everything that comes out, including growth, is tax-free. Withdrawals don’t affect income-tested benefits, and the amount you withdraw is added back to your room on January 1 of the following year.

The most common TFSA mistake is withdrawing and re-contributing in the same year without enough room, which triggers a penalty tax on the excess for every month it stays in the account. Check your room with our TFSA contribution room calculator before moving money around.

How does the FHSA work, and who qualifies?

The FHSA, introduced in 2023, gives you $8,000 of participation room in the year you open your first account and $8,000 each year after that, up to a $40,000 lifetime limit. Unused room carries forward, but only up to $8,000. That means the most you can contribute in a single year is $16,000. According to the CRA’s FHSA contribution rules, room starts only when you open your first FHSA, so there’s no credit for years before that.

The first-time home buyer test

You qualify as a first-time home buyer if, at any time in the current calendar year or the previous four calendar years, you didn’t live as your principal residence in a qualifying home that you owned or jointly owned. The same test applies to a home owned by your current spouse or common-law partner. If you have no spouse or partner when you open the account, the spouse part of the test doesn’t apply. The details are on the CRA’s opening your FHSAs page.

The 15-year window

An FHSA can stay open until December 31 of the year in which the earliest of these happens: the 15th anniversary of opening your first FHSA, you turn 71, or the year after your first qualifying withdrawal. If you don’t buy a home, you can transfer the balance to your RRSP or RRIF tax-free without using RRSP room. That makes the FHSA a low-risk bet: at worst, it becomes extra RRSP room.

A few more FHSA rules worth knowing:

• No 60-day window. FHSA contributions count for the calendar year you make them, so the 2026 deadline is December 31, 2026.
• Deductions can wait. Like the RRSP, you can carry an unclaimed FHSA deduction forward to a later year.
• RRSP transfers aren’t deductible. You can move money from your RRSP to your FHSA, and it uses FHSA room, but you don’t get a second deduction.

Can you use the FHSA and the Home Buyers’ Plan together?

Yes. The CRA confirms you can make an FHSA qualifying withdrawal and an RRSP Home Buyers’ Plan (HBP) withdrawal for the same home, as long as you meet the conditions of each at the time of each withdrawal.

The HBP withdrawal limit is currently $60,000. Unlike an FHSA withdrawal, an HBP withdrawal is a loan to yourself and must be paid back to your RRSP over 15 years. Any amount you don’t repay in a given year is added to your income. Under temporary relief, for first withdrawals made from 2022 through 2028, repayments don’t start until the fifth year after the year of the withdrawal.

Our FHSA calculator can project your own balance and refunds.

Which account should you fund first?

There’s no universal answer, but this order works for many people:

1. First-time buyer? Fund the FHSA first. A deduction going in and a tax-free withdrawal coming out is the best deal of the three.
2. Have an employer RRSP match? Contribute enough to get the full match. It’s free money.
3. Higher income now, lower income expected later? Favour the RRSP. The deduction at today’s rate outweighs the tax on withdrawal later.
4. Lower income, or saving for flexible goals? Favour the TFSA. A deduction is worth less at low rates, and TFSA withdrawals won’t reduce income-tested benefits in retirement.
5. Money left over? Fill whichever account still has room. Even maxing all three is far better than a taxable account.

How MNJ CPA can help

We help individuals and families decide where their savings should go and make sure every deduction is claimed correctly on their return. If you’d like a plan built around your income and goals, see our personal tax services or contact us.