The difference
| TFSA | RRSP | |
|---|---|---|
| Tax when you pay in | No deduction. You pay in from taxed income | Deductible contributions reduce your tax |
| Tax on growth | Generally none | Usually none while the money stays in the plan |
| Tax when you take money out | None | Generally taxed |
| Yearly limit (2026) | $7,000, plus unused room from earlier years | 18% of last year's earned income, at most $33,810, plus unused room from earlier years |
The rules are from the Canada Revenue Agency (CRA).[1][2][4][5][6] Amounts are in Canadian dollars and apply to 2026.
TFSA: flexible and tax-free
Contributions to a TFSA (tax-free savings account) are not tax deductible. Interest, dividends and capital gains earned in it are generally tax-free, and you can withdraw tax-free when you want.[1]
The TFSA dollar limit for 2026 is $7,000. Unused room from earlier years is added to it. An amount you withdraw comes back as new room on January 1 of the following year, not before. If you pay in more than your room, the excess is taxed.[2]
To open one you must be a resident of Canada, 18 or older, with a valid Social Insurance Number. In some provinces and territories you must be 19 to enter a contract.[3]
RRSP: deduction now, tax later
An RRSP is a registered retirement savings plan. Deductible contributions can be used to reduce your tax. Income earned in the plan is usually exempt from tax while it stays there. You generally pay tax when you receive payments from the plan.[4]
Each year you get new room equal to the lesser of 18% of your earned income in the previous year and the annual RRSP limit. Unused room from earlier years is added, and a workplace pension can reduce it.[5] The RRSP dollar limit for 2026 is $33,810.[6]
Example: you earned $60,000 in 2025. 18% of that is $10,800, which is below $33,810, so your new room for 2026 is $10,800.
At any age up to the end of the year you turn 71, you choose what to do with the RRSP: transfer it to a registered retirement income fund (RRIF), buy an annuity, or withdraw the money.[7]
What they can hold
In a TFSA you may buy and sell qualified investments such as stocks, bonds, mutual funds and exchange-traded funds (ETFs).[1] Common qualified investments for an RRSP include money, guaranteed investment certificates, mutual funds and most securities listed on a designated stock exchange.[8]
Saving for a first home
A first home savings account (FHSA) is a separate registered plan for first-time home buyers. Contributions are generally deductible, and your participation room in the year you open your first FHSA is $8,000.[9]
How to weigh them
- TFSA for money you may need earlier. No tax when you take it out, and the room comes back the next year.
- RRSP for money you will leave until later life. The deduction comes now, the tax when you take the money out.
Common questions
If I take money out of my TFSA, can I put it back?
Yes, but not straight away unless you have other room. The amount you withdraw is added back to your contribution room on January 1 of the following year. If you pay in more than your room, the excess is taxed.
Is the fund different in a TFSA and an RRSP?
No. The account changes the tax, not the investment. Mutual funds and securities listed on a designated stock exchange are common qualified investments for both, depending on what your provider offers.
Sources & further reading
We cite independent authorities so you can verify everything yourself. Last reviewed 15 Sept 2026.
- Canada Revenue Agency — What is a TFSA
- Canada Revenue Agency — Calculate your TFSA contribution room
- Canada Revenue Agency — Opening a TFSA
- Canada Revenue Agency — Registered Retirement Savings Plan (RRSP)
- Canada Revenue Agency — How contributions affect your RRSP deduction limit
- Canada Revenue Agency — MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE
- Canada Revenue Agency — Receiving income from an RRSP
- Canada Revenue Agency — Self-directed RRSPs
- Canada Revenue Agency — First Home Savings Account (FHSA)