Tax-advantaged accounts, Canada

TFSA, RRSP, FHSA and RESP in 2026: the limits, how each is taxed, and which to fill first

Canada gives savers four main registered accounts, each with its own tax treatment and limits. Used in the right order they can shelter most of what a household saves. Here are the 2026 numbers, from the Income Tax Act and CRA figures, and how to think about the order.

Updated October 29, 20269 min readData as of 2026 limits; Bank of Canada rate of October 28, 2026

The short version

  • TFSA: $7,000 of new room in 2026, $109,000 in total since 2009 if you have never contributed. Growth and withdrawals are tax-free.12
  • RRSP: 18% of last year's earned income, up to $33,810 for 2026. Contributions are deductible; withdrawals are taxed as income.23
  • FHSA: $8,000 a year, $40,000 lifetime, for a first home. Deductible going in, tax-free coming out for the house.4
  • RESP: the government adds 20% to the first $2,500 a year per child, $500 a year and $7,200 lifetime.25

The four accounts side by side

Account2026 limitGoing inComing outBest for
TFSA$7,000 ($109,000 cumulative)No deductionTax-free, any time, any purpose; room returns next yearAlmost everyone; the first account for most incomes
RRSP18% of 2025 earned income, max $33,810DeductibleTaxed as income; withholding tax on withdrawals before retirementHigher incomes now who expect a lower rate in retirement; employer matching
FHSA$8,000 a year, $40,000 lifetimeDeductibleTax-free for a qualifying first-home purchase; otherwise moves to an RRSPAnyone who may buy a first home within 15 years of opening
RESP$50,000 lifetime per childNo deduction, but a ${L.cesgPct}% grantGrowth and grants taxed in the student's hands, usually at little or no taxChildren's post-secondary education

Sources: Income Tax Act sections 207.01, 146 and 146.6;134 RBC Wealth Management 2026 planning facts for the CRA dollar figures;2 Canada Education Savings Act for the grant.5

TFSA: the one to understand first

The tax-free savings account does not reduce your taxes this year. Instead, nothing inside it is ever taxed: not interest, not dividends, not capital gains, and not withdrawals. Room accumulates every year from the year you turn 18 (if resident in Canada), whether or not you open an account. The 2026 limit is $7,000; the limits are set in the Income Tax Act and indexed to inflation in $500 steps.1 Someone eligible since the program began in 2009 who has never contributed has $109,000 of room.

The TFSA dollar limit for each year since 2009. The total, $109,000, is the room of someone eligible every year who has never contributed. Computed from Income Tax Act s. 207.01 and Statistics Canada's CPI.1

Two rules trip people up. First, a withdrawal adds the same amount back to your room, but only on January 1 of the following year; putting it back in the same year counts as a new contribution and can exceed your limit, which costs 1% a month on the excess. Second, "savings account" is a misnomer: a TFSA can hold stocks, ETFs and GICs, and for long-term money it usually should. Your room is on your CRA My Account, though it lags by a year.

RRSP: a deduction now, tax later

A contribution to a registered retirement savings plan is deducted from income, so a $10,000 contribution at a 40% marginal rate returns about $4,000 in tax. The money grows untaxed, and withdrawals are taxed as income, ideally in retirement at a lower rate. Room is 18% of the previous year's earned income up to a dollar limit that is indexed each year: $33,810 for 2026.23 A workplace pension reduces the room through a pension adjustment. Unused room carries forward indefinitely. The deadline to deduct a contribution on your 2026 return is March 1, 2027.

The RRSP wins when your tax rate is higher now than it will be in retirement, which is common for higher earners. The TFSA wins when the reverse is true, or when the money may be needed before retirement. Below roughly the second federal bracket, the TFSA usually comes first; above it, the RRSP deduction is worth more, and a sensible move is to contribute the refund to the TFSA. If an employer matches group RRSP contributions, take the match before anything else.

FHSA: both breaks, for a first home

The first home savings account, introduced in 2023, combines the RRSP's deduction with the TFSA's tax-free withdrawal, provided the withdrawal buys a qualifying first home. The annual limit is $8,000, with unused room carrying forward up to $8,000, and the lifetime limit is $40,000.4 The account can stay open 15 years, and if no home is bought the money can move to an RRSP without using RRSP room. For anyone who might buy a first home, that makes the FHSA a no-lose account, and most planners put it ahead of both the TFSA and RRSP for that goal. It can be combined with the RRSP Home Buyers' Plan on the same purchase.

RESP: free money for a child's education

A registered education savings plan has no deduction, but the federal Canada Education Savings Grant adds 20% to the first $2,500 contributed each year per child, $500 a year, to a lifetime maximum of $7,200; lower-income families receive an extra 10% or 20% on the first $500.25 Unused grant room carries forward, so a missed year can be caught up with a $5,000 contribution. The lifetime contribution limit is $50,000 per child. Growth and grants are taxed when withdrawn for school, in the student's hands, which usually means little or no tax. Contributing $2,500 a year from birth captures the full grant by the time a child is 15.

A sensible order

  1. Employer match in a group RRSP or pension: immediate return.
  2. Clear card debt and keep a cash cushion. Card balances in Canada charged 21.28% in July 2026, which no account can beat.6 See our guide on credit card debt.
  3. FHSA if a first home is possible: $8,000 a year.
  4. RESP to $2,500 per child, for the full grant.
  5. TFSA or RRSP, by tax rate: TFSA first at lower incomes, RRSP first at higher ones, with the refund going to the TFSA.
  6. The other of the two, then a non-registered account.

Where to hold cash for the cushion: the Bank of Canada raised its policy rate to 2.5% on October 28, 2026, and high-interest savings accounts move with it, so compare rates rather than accept a big bank's default.7 Where to invest the long-term money is covered in our guide on long-term stock returns, and the habits that keep the contributions going are in money habits that last. Knowing how much room you have to save starts with knowing where the money goes now; our guide on average household spending has the Canadian figures.

Common mistakes

US readers: the parallel accounts, and the 2026 IRS limits, are in our guide on 401(k), IRA, Roth and HSA.

Sources

  1. Income Tax Act (Canada), Justice Laws. Section 207.01, TFSA dollar limit
  2. RBC Wealth Management. 2026 handy financial planning facts (RRSP limit $33,810 for 2026, deadline March 1, 2027; FHSA $8,000; CESG 20% of $2,500, $7,200 lifetime)
  3. Income Tax Act (Canada), Justice Laws. Section 146, Registered retirement savings plans (RRSP deduction limit: 18% of earned income up to the RRSP dollar limit)
  4. Income Tax Act (Canada), Justice Laws. Section 146.6, First home savings accounts ($8,000 annual limit, $40,000 lifetime)
  5. Canada Education Savings Act, Justice Laws. Canada Education Savings Act, S.C. 2004, c. 26 (CES grant)
  6. Statistics Canada. Table 10-10-0006-01, Funds advanced and outstanding balances for non-mortgage loans: credit card loans, July 2026: 21.28%
  7. Bank of Canada. Bank of Canada raises the policy rate by 25 basis points to 2½% (October 28, 2026)

This guide is general information, not financial, tax, or investment advice. Rules and limits change; check the sources for the current figures before acting.

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