First Home Savings Account. $8,000/year, $40,000 lifetime. Tax-deductible contributions and tax-free withdrawals for qualifying first home purchase.

Can I use FHSA and HBP together?

Yes. FHSA up to $40,000+ growth tax-free no repayment. HBP up to $60,000 from RRSP must repay over 15 years. Couple maximum $200,000 combined.

Do dividends create RRSP room?

No. Only T4 salary creates RRSP room at 18%. Need $180,500 salary for 2026 maximum $32,490.

Savings Calculator · Canada 2026

RRSP vs. TFSA vs. FHSA Contribution Calculator

Q: What is the 2026 RRSP contribution limit?

18% of 2025 earned income up to $32,490. Unused room carries forward indefinitely.

Q: What is the 2026 TFSA contribution limit?

$7,000 annual. Cumulative room $102,000 for residents age 18+ since 2009.

Q: Should I contribute to RRSP or TFSA first?

RRSP if marginal rate above 30% and lower expected at withdrawal. TFSA if rate same or higher at withdrawal. FHSA first for home buyers.

Q: What is the TFSA over-contribution penalty?

1% per month on excess amount. Accrues regardless of CRA notification. Check room on CRA My Account before contributing.

Compare all three registered accounts side by side — tax deductions, contribution limits, withdrawal rules, growth projections and the optimal strategy for your income level. 2026 limits included. Written by a licensed Ontario CPA.

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2026 Contribution Limits — RRSP vs. TFSA vs. FHSA

Account	2026 Annual Limit	Lifetime Limit	Carry-Forward	Tax Deduction
RRSP	$32,490 (or 18% of prior-year earned income)	No lifetime cap	Yes — unlimited carry-forward of unused room	Yes — contribution reduces taxable income
TFSA	$7,000	$102,000 (cumulative since 2009 for age 18+ residents)	Yes — unused room carries forward indefinitely	No — contributions are after-tax
FHSA	$8,000	$40,000	Yes — up to $8,000 per year carry-forward	Yes — contribution reduces taxable income

Complete Comparison: RRSP vs. TFSA vs. FHSA

Feature	RRSP	TFSA	FHSA
Tax deduction on contribution	Yes	No	Yes
Tax-free growth inside the account	Yes (tax-deferred)	Yes (tax-free)	Yes (tax-free)
Tax on withdrawal	Yes — taxed as income	No — tax-free	No — tax-free for home purchase
RRSP room created	N/A	No	No
Eligibility	Any Canadian resident with earned income	Canadian resident age 18+	First-time home buyer, Canadian resident age 18–71
2026 annual limit	$32,490 (or 18% earned income)	$7,000	$8,000
Lifetime limit	None	$102,000 cumulative	$40,000
Best for	High-income earners expecting lower tax rate in retirement	Anyone — especially if tax rate same or higher at withdrawal	First-time home buyers — "best of both worlds"
Withdrawal restrictions	Taxed as income; HBP allows $60,000 tax-free (must repay over 15 years)	None — withdraw anytime for any purpose	Tax-free only for qualifying first home purchase
If unused for intended purpose	N/A — always available for retirement	N/A — always flexible	Can transfer to RRSP tax-free (no RRSP room used)
Spousal option	Yes — spousal RRSP available	No — individual only	No — individual only (but couples each get $40,000)
Over-contribution penalty	1% per month on excess over $2,000 buffer	1% per month on excess	1% per month on excess

When to Use Each Account — Decision Framework

Your Situation	Best Account	Why
Income over $55,000 and expecting lower income in retirement	RRSP	Deduction at high rate now, withdrawal at lower rate later — the spread is pure savings
Income under $55,000 or same/higher income expected at withdrawal	TFSA	No benefit from deduction at low rate — tax-free withdrawal is more valuable
First-time home buyer saving for a down payment	FHSA first, then TFSA	FHSA gives you the deduction AND tax-free withdrawal — max it before TFSA
Business owner paying salary from corporation	RRSP (salary creates room)	Salary creates RRSP room at 18%. Dividends do not. Pay enough salary to maximise RRSP.
Already maxed RRSP and TFSA	FHSA (if eligible) then non-registered	FHSA is the only remaining tax-sheltered option for eligible buyers
Saving for education (children)	RESP (not covered here)	20% CESG match — RESP is always the first priority for education savings

The FHSA Advantage for First-Time Buyers: The FHSA is genuinely the "best of both worlds." You get a tax deduction on contributions (like an RRSP) and tax-free withdrawals for your first home purchase (like a TFSA). No other registered account in Canada provides both benefits simultaneously. If you are a first-time home buyer, max out your FHSA ($8,000/year, $40,000 lifetime) before contributing to any other account. If you do not end up buying a home, FHSA funds transfer to your RRSP tax-free without using RRSP contribution room.

Worked Dollar Examples — RRSP vs. TFSA vs. FHSA

Scenario	RRSP Result	TFSA Result	FHSA Result	Winner
$10,000/yr for 10 years, 6% return, 33.89% tax now, 20.05% at withdrawal	After-tax: $169,443	After-tax: $131,808	After-tax: $52,723 (capped at $40K)	RRSP (retirement) / FHSA (home)
$7,000/yr for 15 years, 6% return, 29.65% tax now, 29.65% at withdrawal	After-tax: $116,032	After-tax: $163,041	After-tax: $50,212 (capped)	TFSA — same tax rate means TFSA wins
$8,000/yr for 5 years, 6% return, first-time buyer, 33.89% tax	After-tax: $49,832 (HBP: must repay)	After-tax: $33,041	After-tax: $45,089 (no repayment!)	FHSA — deduction + tax-free + no repayment

RRSP vs. TFSA — The Tax Rate Is Everything: If your tax rate will be lower at withdrawal than at contribution, RRSP wins. If your tax rate will be the same or higher, TFSA wins. This single variable determines the right answer for most Canadians. A CPA models your current and projected retirement income to determine which rate applies to you — do not guess.

Business Owners: Salary vs. Dividends and RRSP Room

If you are an incorporated business owner, your RRSP contribution room is created by T4 salary — not dividends. Dividends do not generate RRSP room. To maximise your RRSP contribution for 2026 ($32,490 maximum), you need to pay yourself a salary of at least $180,500 in 2025 (18% x $180,500 = $32,490). If you pay yourself entirely in dividends, your RRSP room is zero.

This is one of the core salary vs. dividend planning decisions we model for every corporate client annually. The optimal split depends on your personal income, spousal income, RRSP room carried forward, childcare deduction needs and whether the RRSP contribution or the dividend tax credit produces a better after-tax result. Book Free Consultation →

Frequently Asked Questions — RRSP vs. TFSA vs. FHSA

What is the 2026 RRSP contribution limit?

The 2026 RRSP contribution limit is 18% of your 2025 earned income, up to a maximum of $32,490. Unused RRSP room carries forward indefinitely. Your available room is shown on your most recent CRA Notice of Assessment.

What is the 2026 TFSA contribution limit?

The 2026 TFSA annual contribution limit is $7,000. The cumulative lifetime room for someone who has been a Canadian resident age 18+ since 2009 is $102,000. Unused room carries forward indefinitely. Withdrawals are added back to contribution room in the following year.

What is the FHSA and who is eligible?

The First Home Savings Account (FHSA) allows first-time home buyers to contribute up to $8,000/year ($40,000 lifetime), receive a tax deduction on contributions and withdraw tax-free for a qualifying first home purchase. You must be a Canadian resident age 18–71 who has not owned a home you lived in during the past four calendar years plus the current year. Couples can each have their own FHSA.

Should I contribute to RRSP or TFSA first?

If your marginal tax rate is above 30% and you expect a lower rate in retirement, RRSP first. If your rate is below 30% or you expect the same or higher rate at withdrawal, TFSA first. For first-time home buyers, FHSA before both. We model this for every client based on actual income projections. Get CPA Advice →

Can I use FHSA and the Home Buyers' Plan (HBP) together?

Yes. You can combine FHSA withdrawals (up to $40,000 + growth, tax-free, no repayment) with HBP withdrawals from your RRSP (up to $60,000, must repay over 15 years). For a couple, the combined maximum is $200,000 ($80,000 FHSA + $120,000 HBP). This is the most powerful down payment strategy available in Canada.

What happens if I open an FHSA but never buy a home?

If you do not purchase a qualifying home within 15 years of opening the account (or by age 71), you can transfer the FHSA balance to your RRSP tax-free without using RRSP contribution room. Alternatively, you can withdraw the funds — but taxable withdrawals are included in your income like an RRSP withdrawal.

Do dividends from my corporation create RRSP room?

No. Only T4 salary (earned income) creates RRSP contribution room at 18%. Dividends do not generate RRSP room. To maximise 2026 RRSP room ($32,490), you need a 2025 T4 salary of at least $180,500. We model the optimal salary vs. dividend split for every corporate client.

What is the TFSA over-contribution penalty?

CRA charges a penalty of 1% per month on the excess TFSA contribution. The penalty applies for every month the excess remains in the account. CRA sends a letter, but the penalty accrues regardless of whether you received it. Check your available TFSA room on CRA My Account before contributing.