RRSP vs TFSA: Differences, Limits and Tax Refund (2026)
An RRSP contribution reduces taxable income and a TFSA contribution does not, so only the RRSP produces a refund. An RRSP withdrawal is taxed as income and a TFSA withdrawal is not. Annual limits also differ.
This page shows how RRSP and TFSA differ. It does not say which account is better for you.
Differences
| Item | RRSP | TFSA |
|---|---|---|
| Tax deduction | Yes | No |
| Tax on qualified withdrawal | Taxed as income | None |
| Annual limit | 18% of prior-year earned income, up to $33,810 | $7,000 |
| Lifetime limit | No set lifetime amount. Contributions end on December 31 of the year you turn 71. | No set lifetime amount. Room is added each year. |
| Carry-forward | Unused room can be used later. Check your Notice of Assessment in CRA My Account. | Unused room carries forward. Withdrawals are added back the next calendar year. |
| Deadline | Mar 1, 2027 | New room on Jan 1, 2027 |
| Purpose requirement | Retirement savings. The Home Buyers' Plan allows withdrawals for a qualifying home. | Savings and investments, with no required purpose |
Source: www.canada.ca · As of: Oct 2026 Estimate
Numbers example
| Taxable income | RRSP: Estimated refund | RRSP: Net cost | TFSA: Estimated refund | TFSA: Net cost |
|---|---|---|---|---|
| $60,000 | $1,832.01 | $6,168.00 | $0.00 | $8,000.00 |
| $85,000 | $2,256.00 | $5,744.00 | $0.00 | $8,000.00 |
| $120,000 | $2,720.43 | $5,279.57 | $0.00 | $8,000.00 |
It depends on your income, home-buying plans and tax rate in retirement.
Federal brackets · Source: www.canada.ca · As of: Oct 2026 Estimate
Provincial or territorial brackets · Source: www.canada.ca · As of: Oct 2026 Estimate
Basic personal amount · Source: www.canada.ca · As of: Oct 2026 Estimate
What the difference depends on
- When you plan to buy a home
- Your tax rate now and in retirement
- Your contribution room
Home-buying plans. An RRSP withdrawal is taxed as income and a TFSA withdrawal is not. For saving toward a first home, the FHSA vs RRSP and FHSA vs TFSA pages show how the FHSA differs.
Tax rates. An RRSP contribution gives a deduction at your rate now, and a withdrawal is taxed at your rate later. A TFSA contribution has no deduction and a withdrawal has no tax, so the difference between your rates now and later matters more for the RRSP.
Contribution room. The RRSP limit depends on prior-year earned income, up to $33,810 for 2026. The TFSA limit for 2026 is $7,000.
Estimate for information only, not tax or investment advice. Based on 2026 tax rates. Excludes the Ontario Health Premium, CPP/EI and other credits.