Canada offers three registered accounts that can lower your tax bill: the RRSP, the TFSA and the FHSA. Each one works differently, and the right mix depends on your income, your goals and when you will need the money.

RRSP: a tax deduction now, tax later

• Contributions reduce your taxable income for the year.
• Investments grow tax-deferred; you pay tax when you withdraw.
• 2026 limit: 18% of your previous year’s earned income, up to $33,810, plus unused room.

Best for: people in a higher tax bracket today who expect a lower bracket in retirement.

TFSA: tax-free growth and flexible withdrawals

• No deduction when you contribute.
• Growth and withdrawals are tax-free, and withdrawals do not affect income-tested benefits.
• Amounts you withdraw are added back to your contribution room the following year.
• 2026 room: $7,000, with a total of $109,000 if you have been eligible since 2009 and never contributed.

Best for: flexible savings, emergency funds, and people in a lower tax bracket today.

FHSA: the best of both for first-time buyers

• Contributions are deductible, like an RRSP.
• Qualifying withdrawals to buy your first home are tax-free, like a TFSA.
• Up to $8,000 a year, to a lifetime maximum of $40,000.

Best for: anyone eligible who is saving for a first home. Unused funds can generally be transferred to an RRSP without affecting your RRSP room.

How to choose

• Buying your first home? Start with the FHSA.
• Higher income and saving for retirement? The RRSP deduction is worth more to you.
• Lower income, or you may need the money sooner? The TFSA is often the better fit.

Many people use more than one account. The key is knowing your contribution room, which you can find on your Notice of Assessment or in CRA My Account, and never contributing more than your limit, since over-contributions are taxed.

Need a hand?

LMZ Accounting helps individuals and small businesses across Canada with bookkeeping, payroll, tax preparation and GST filing. Call us at (306) 450-0434, email leonardceo@lmzaccounting.com, or send us a message.

This article is general information, not tax or legal advice. Tax rules change and every situation is different, so talk to us about yours before you act.