Rethink Normal

The FHSA is the only one with a tax break going in and coming out.

A TFSA, an RRSP and an FHSA each save tax in a different place. This page sets out what each one gives, who can open it and how much can go in, using the Canada Revenue Agency’s own pages. It does not tell you which to use first.

By Aman Sabarwal · Winnipeg · Video published · · How this was researched
Checked against source · 29 September 2026

No affiliate links. No sponsors. Nothing for sale. Just the math.

Is this you?

You are new to Canada, or new to saving, and you have heard all three names. Everyone says to start with one of them, and nobody agrees which.

You have some money to save. Your bank suggests a TFSA. A friend says RRSP. Someone online says FHSA.

Each account saves tax, but at a different moment: when the money goes in, while it grows, or when it comes out.

Three accounts, three tax breaks

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What each account gives. From the Canada Revenue Agency’s pages, read on 29 September 2026.
TFSA RRSP FHSA
Going in No deduction Deductible Deductible
While it grows Not taxed Usually not taxed Not taxed
Coming out Not taxed Taxed as income Not taxed, if it is a qualifying withdrawal for a first home
New room in 2026 $7,000 18% of last year’s earned income, up to $33,810 $8,000, plus up to $8,000 carried forward
Lifetime limit Not set: room builds each year Not set: room builds each year $40,000
The money is for Anything Retirement, or a first home through the Home Buyers’ Plan A qualifying first home

The FHSA is the only one with no tax going in and no tax coming out. The catch is the test to open it, and what the money can be used for.

The TFSA

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The CRA says: “Any contribution you make to your TFSA and any income you earn through interest, dividends or capital gains are generally tax-free, even when you make a withdrawal.” Contributions are not deductible.

Room. “The TFSA dollar limit for 2026 is $7,000.” Someone eligible every year since the TFSA began in 2009 would have $109,000 of total room in 2026. That is our sum of the CRA’s list of yearly limits, not a CRA figure.

Withdrawals come back. “When you withdraw from your TFSA, you will regain the same amount as new available contribution room on January 1 of the following year.”

If you are new to Canada. The CRA says: “If you are a new resident of Canada, you start to accumulate contribution room on the day you have residency if you are 18 years of age or older.” Room does not go back to 2009. The CRA’s own example is David, who became a resident in 2024 and contributed $95,000. He had $7,000 of room, the limit for 2024. The other $88,000 was an excess, taxed at 1% for every month it stayed in the account.

The RRSP

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The deduction comes now and the tax comes later. The CRA says: “Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan. However, you generally have to pay tax when you cash in, make withdrawals, or receive payments from the plan.” When you withdraw, the financial institution holds back tax: 10% on amounts up to $5,000, 20% from $5,000 to $15,000, and 30% over $15,000, with lower rates in Quebec.

Room. New room each year is 18% of your earned income in the previous year, up to a dollar limit: $33,810 for 2026, up from $32,490 for 2025. Unused room carries forward, and a pension adjustment from a workplace pension plan reduces it.

Because the new room comes from last year’s earned income, a year with no earned income adds no new room the next year.

What the deduction is worth depends on the tax bracket. For 2026, the federal rate is 14% on taxable income up to $58,523, and 20.5% from there to $117,045.

An example, not a real person. Someone earns $60,000 and contributes $3,000 to an RRSP. Their taxable income falls to $57,000. The first $1,477 of the deduction comes off income taxed at 20.5%, which saves $302.78. The other $1,523 comes off income taxed at 14%, which saves $213.22. Federal tax falls by $516. Provincial tax falls too, by an amount that depends on the province. This is our arithmetic, federal tax only.

The FHSA

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The FHSA combines the other two. Contributions “are generally deductible on your income tax and benefit return for the year of the contribution or a future year”. And “If you meet all of the qualifying withdrawal conditions, you can withdraw all of the property from your FHSAs tax-free.” A qualifying withdrawal does not need to be paid back.

Who can open one. The CRA lists the conditions. You are a resident of Canada. You are 18 or older, or 19 in provinces where that is the legal age to sign a contract. You are 71 or younger on 31 December of the year you open it. And, in the CRA’s words: “You did not live in a qualifying home (or what would be a qualifying home if located in Canada) as your principal place of residence that you owned or jointly owned in this calendar year or in the previous 4 calendar years.”

“(or what would be a qualifying home if located in Canada)” means the test counts a home you owned and lived in outside Canada too. The same test applies to a home your spouse or common-law partner owned, if you have one when you open the account.

Room. “Your FHSA participation room in the year you open your first FHSA is $8,000.” Unused room can be carried forward, but the carryforward is capped at $8,000. The CRA’s example is Wendy. She opened an FHSA in June 2026, contributed nothing that year, and reported the new account on Schedule 15 of her 2026 tax return. Her room for 2027 was $16,000.

The cap is what matters. Someone who opens an FHSA and contributes nothing for two years still has only $16,000 of room in the third year, not $24,000. Room does not build up before the first FHSA is opened: the CRA’s formula gives $8,000 in the year you open it, and no carryforward that year.

Lifetime limit. $40,000 in total contributions. The account can stay open until 31 December of the year of the 15th anniversary of opening your first FHSA, the year you turn 71, or the year after your first qualifying withdrawal, whichever comes first.

The FHSA and the Home Buyers’ Plan together

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The Home Buyers’ Plan (HBP) lets you withdraw from an RRSP to buy a first home. “Currently, the HBP withdrawal limit is $60,000.” The money is repaid to the RRSP over up to 15 years. For a first HBP withdrawal made between 1 January 2026 and 31 December 2028, the CRA says repayments start in the fifth year after the year of the first withdrawal, rather than the second: a first withdrawal in 2026 means a first repayment year of 2031.

The CRA says you can use both for the same home: “You can withdraw amounts from your RRSP under the HBP and make a qualifying withdrawal from your first home savings account (FHSA) for the same qualifying home, as long as you meet all of the conditions at the time of each withdrawal.”

$40,000 from an FHSA and $60,000 from the HBP is $100,000 for one person. That is our arithmetic, and it assumes both limits are fully used.

Questions that sort the rules

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The video gives an order: the FHSA first, then the RRSP, then the TFSA. This page does not give one, because the right order depends on your own situation: whether you can open an FHSA, how your income is taxed, and when you need the money. These questions show which rules apply to you.

Have you, or your spouse, owned and lived in a home, anywhere in the world, this year or in the last four calendar years? If so, the CRA’s test for opening an FHSA is not met today.

How much of your income is taxed at 20.5% or more? The RRSP deduction saves more tax the higher the bracket the money comes off. Your last notice of assessment shows your taxable income.

When might you need the money? A TFSA withdrawal is not taxed, and the room comes back next year. An RRSP withdrawal is taxed. An FHSA withdrawal is tax-free only as a qualifying withdrawal for a first home.

Were you a resident of Canada in each year you are counting room for? TFSA room starts the day you become a resident. RRSP room comes from last year’s earned income.

What you now know

A TFSA gives no deduction but tax-free growth and withdrawals, with $7,000 of new room in 2026, and a newcomer’s room starts the day they become a resident. An RRSP gives a deduction now and tax on withdrawal, with new room of 18% of last year’s earned income up to $33,810 for 2026. An FHSA gives a deduction and a tax-free qualifying withdrawal, $8,000 a year and $40,000 in total, with a home test that counts homes outside Canada and a carryforward capped at $8,000. The FHSA and the Home Buyers’ Plan can be used for the same first home.

Common questions

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Does a home I owned in another country stop me opening an FHSA?

If you lived in it as your main home this year or in the previous four calendar years, the CRA’s test counts it: “(or what would be a qualifying home if located in Canada)”.

Do I lose FHSA room if I wait to open one?

Room starts when the first FHSA is opened, so there is no room to lose before then. Once it is open, unused room above the $8,000 carryforward cap is lost.

The video says to fill the FHSA first. Why does this page not?

The video gave one order for most newcomers and young Canadians. This page sets out the rules and does not choose for you, because the right order depends on the home test, your income and when you need the money.

The video says a $3,000 RRSP contribution on $60,000 gives back roughly $600. Why does this page say $516?

At $60,000, only the first $1,477 of the deduction comes off income taxed at 20.5%. The rest comes off income taxed at 14%. $516 is federal tax only; provincial tax adds more.

Sources

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Every claim on this page was checked against these documents on 29 September 2026.

TFSA vs RRSP vs FHSA | The Order Most Canadians Get Wrong (Canada 2026). Published 6 May 2026. Loads on click. Nothing is requested from YouTube until you ask.

Found an error on this page? Tell me (aman@rethinknormal.ca)