Canada has five major registered accounts, each with different tax rules, contribution limits, and intended purposes. Most Canadians are aware of the TFSA and RRSP. Many ignore the FHSA entirely (a significant mistake for first-time buyers). Fewer maximise the RESP grant. And the RDSP is underused even by those who qualify.
This is the complete breakdown — what each account does, who it's for, and which order to prioritise them.
Quick Comparison: All Five Accounts
| Account | 2025 Annual Limit | Contribution Type | Growth | Withdrawal Tax |
|---|---|---|---|---|
| TFSA | $7,000 | After-tax | Tax-free | None |
| RRSP | 18% of earned income, max $32,490 | Pre-tax (deductible) | Tax-deferred | 100% taxable income |
| FHSA | $8,000 (lifetime $40,000) | Pre-tax (deductible) | Tax-free | Tax-free (qualifying home); RRSP transfer if no home |
| RESP | No annual limit* | After-tax | Tax-deferred | Taxed in student's hands (EAP only) |
| RDSP | No annual limit | After-tax | Tax-deferred | Taxable (DAP portion) |
*RESP: $2,500/year maximises the CESG grant; lifetime limit $50,000.
The Five Accounts in Detail
Tax-Free Savings Account (TFSA)
Everyone 18+ and a Canadian residentContribution limit: $7,000 in 2025. Lifetime room accumulates from the year you turned 18 (or 2009, whichever is later). If you were 18 before 2009, your total room in 2025 is $95,000.
Tax structure: Contributions come from after-tax dollars — no deduction. Growth inside the account is tax-free. Withdrawals are completely tax-free and do not affect income-tested benefits like OAS, GIS, or the HST/GST credit.
Withdrawal room: When you withdraw, that amount is added back to your TFSA room the following January 1. You can re-contribute it then without penalty.
Best for: Flexible savings; emergency funds; high-income earners approaching OAS clawback threshold ($93,208 in 2025); anyone who wants tax-free withdrawals with no strings attached; low-income earners who expect higher income later (save RRSP room for when the deduction is worth more).
Watch for: Over-contribution penalties ($1/day on excess). Re-contributing in the same calendar year as a withdrawal when no room exists is the most common mistake.
Registered Retirement Savings Plan (RRSP)
High-income earners; peak earning yearsContribution limit: 18% of prior year earned income, maximum $32,490 in 2025. Unused room carries forward indefinitely. Your notice of assessment shows exact available room.
Tax structure: Contributions are tax-deductible — you can deduct them against any income in the year you contribute, or carry the deduction forward to a higher-income year. Growth is tax-deferred (not tax-free). Every dollar withdrawn is fully taxable income in the year of withdrawal.
Deadline: Must convert to RRIF (Registered Retirement Income Fund) by December 31 of the year you turn 71. RRIF has mandatory minimum withdrawals starting at age 72.
Best for: Peak earning years when you're in a high marginal bracket (30%+) and expect to withdraw at a lower rate in retirement; the RRSP meltdown strategy; spousal RRSP contributions to split income in retirement.
Watch for: The RRIF mandatory minimum trap — large RRSP balances at 71 produce mandatory taxable income that stacks on CPP, OAS, and possibly triggers OAS clawback.
First Home Savings Account (FHSA)
First-time home buyers onlyContribution limit: $8,000/year, lifetime maximum $40,000. Unused room carries forward one year only (not indefinitely like TFSA or RRSP).
Tax structure: The best of both worlds. Contributions are tax-deductible (like RRSP). Qualifying withdrawals for a first home purchase are completely tax-free (like TFSA). Growth inside is tax-free. If you never buy a home, the balance transfers to RRSP with no tax consequences — you keep the deductions you already claimed.
Eligibility: Must be a first-time buyer (no home ownership in the current or prior 4 calendar years), Canadian resident, age 18–70. Account must be open for at least one full calendar year before making a qualifying withdrawal.
Best for: Any eligible first-time buyer — period. The FHSA wins on the first $40,000 saved for a home. Open one immediately even with $100, to start the one-year clock. Combine with RRSP HBP ($35,000) for up to $75,000/person, $150,000/couple.
Registered Education Savings Plan (RESP)
Parents saving for children's educationContribution limit: No annual limit, but contribute $2,500/year to maximise the Canada Education Savings Grant (CESG). Lifetime maximum: $50,000 per beneficiary.
The grant: The federal government contributes 20% of the first $2,500 contributed per year = $500 free per year, up to a lifetime maximum of $7,200 per beneficiary. Lower-income families may qualify for additional CESG and the Canada Learning Bond (CLB).
Tax structure: Contributions are after-tax (no deduction). Growth is tax-deferred. Educational Assistance Payments (EAPs — the grant, bonds, and investment earnings) are taxed in the student's hands when withdrawn. Students typically pay little or no tax on EAPs given low income and education credits.
Best for: Any parent planning for a child's post-secondary education. The CESG alone is a 20% instant return on the first $2,500/year — better than almost any investment return available risk-free. Open an RESP as soon as possible after a child's birth.
Watch for: If the child doesn't pursue post-secondary education, the CESG must be repaid and investment earnings are taxed at your rate plus a 20% penalty tax. However, RESP funds can be transferred to a sibling's RESP, or to your own RRSP (up to $50,000, subject to RRSP room).
Registered Disability Savings Plan (RDSP)
Canadians with a disability and their familiesContribution limit: Lifetime maximum of $200,000. No annual limit. Contributions are after-tax (no deduction).
Government grants and bonds: The Canada Disability Savings Grant (CDSG) matches contributions up to 300% depending on family income and contribution amount. The Canada Disability Savings Bond (CDSB) provides up to $1,000/year to lower-income individuals with no contribution required.
Best for: Individuals eligible for the Disability Tax Credit (DTC) and their families. The RDSP provides long-term financial security and substantial government support. It is one of the most underused registered accounts in Canada, even among those who qualify.
Priority Order: Which Account to Fill First
- FHSA — if you're an eligible first-time buyer. Tax-deductible in AND tax-free out is the best structure available. No question.
- RRSP employer match — if your employer matches RRSP or group pension contributions, capture 100% of the match before anything else. It's an immediate 50–100% return.
- RESP — if you have children under 18. The CESG is a 20% instant return on $2,500/year. Contribute $2,500/year per child before anything else after capturing employer matches.
- TFSA — always useful. Flexible withdrawals, no tax, no clawback impact. Use for emergency fund, medium-term goals, and retirement savings.
- RRSP — the remaining contribution room after the above. Best used in high-income years when the deduction is worth the most.
- Non-registered accounts — after all registered room is used. Hold tax-efficient investments here (Canadian dividend payers, equity ETFs with capital gains).
Note on RDSP: If you or a family member qualifies for the DTC and is under 49, opening an RDSP immediately to capture government grants and bonds should jump near the top of this list — the government match rates are extraordinary.
The "Which One First" Shortcuts
| Your Situation | Start Here | Why |
|---|---|---|
| First-time home buyer, eligible for FHSA | FHSA | Deductible in, tax-free out — best structure for a home purchase |
| Low income now, expect higher later | TFSA | Save RRSP deductions for the year your marginal rate is higher |
| High income now, lower expected in retirement | RRSP | Deduct at 40%+, withdraw at 20–26% — the bracket differential is the gain |
| Kids under 18 at home | RESP ($2,500/year each) | CESG = 20% guaranteed return; don't leave it on the table |
| Near OAS clawback threshold in retirement | TFSA drawdown | TFSA withdrawals are invisible to CRA for net income; won't trigger clawback |
| Employer offers RRSP match | Employer match first | 50–100% guaranteed return before any investment is made |
The Accounts No One Talks About Together: FHSA + RRSP HBP
For first-time buyers, the FHSA and RRSP Home Buyers' Plan (HBP) can be used together on the same purchase. FHSA lifetime max ($40,000) plus HBP ($35,000) = $75,000 per person. For couples, that's $150,000 combined from registered accounts for a down payment.
The FHSA is superior to HBP for the first $40,000: no repayment required, contributions are deductible, and withdrawal is tax-free. Use HBP only after maximising FHSA. See: Complete FHSA Guide.
What Happens to Unused Room
- TFSA: Unused room accumulates from the year you turned 18 (or 2009). Withdrawals restore the following January. No deadline.
- RRSP: Unused room carries forward indefinitely. Closes at age 71 (must convert to RRIF).
- FHSA: Unused room carries forward ONE year only. Account closes after 15 years or age 71.
- RESP: Unused CESG room can be caught up — the grant allows double contributions ($5,000/year) to catch up prior years' missed grants, up to a maximum extra $500/year in grants.
- RDSP: Unused grant and bond room carries forward 10 years.
Financial disclaimer: This page is for educational purposes only. Contribution limits and tax rules are set by the Canada Revenue Agency and change annually. Verify current limits at canada.ca. Consult a qualified financial advisor or tax professional before making investment decisions.