Worked Calculations and Checklists
TFSA vs RRSP: the tax math that decides which one saves you more
Why a TFSA and an RRSP give the same result when your tax rate is the same now and later, worked examples at different retirement rates, the 2026 TFSA limit and room rules.
The choice between a TFSA and an RRSP comes down to one comparison: your marginal tax rate today versus your marginal rate when the money comes out. If the two rates are the same, both accounts give exactly the same after-tax result. If your rate will be lower in retirement, the RRSP wins; if it will be higher (including benefit clawbacks such as the OAS recovery tax), the TFSA wins. For 2026 the TFSA annual limit is $7,000, and someone eligible since 2009 who has never contributed has $109,000 of room.
This guide sits in the worked examples hub and focuses on the tax arithmetic only. It is general information, not investment advice; it assumes the same investments in both accounts.
The equivalence, shown with numbers
Take $5,000 of pre-tax salary for an Ontario employee at a 29.65% marginal rate, and assume the investment doubles before it is withdrawn (illustrative).
| RRSP | TFSA | |
|---|---|---|
| Amount invested | $5,000 (the deduction makes it pre-tax) | $5,000 − 29.65% tax = $3,517.50 |
| Value after doubling | $10,000 | $7,035 |
| Tax on withdrawal at 29.65% | −$2,965 | $0 |
| After-tax result | $7,035 | $7,035 |
Same result. The RRSP refund is not extra money; it is the government's share of the account, which it takes back on withdrawal. What matters is whether the rate on the way out is lower or higher than on the way in.
When the rates differ
| Rate at withdrawal | RRSP after tax ($10,000 withdrawn) | TFSA result | Better choice |
|---|---|---|---|
| 19.05% (modest retirement income) | $8,095 | $7,035 | RRSP by $1,060 |
| 29.65% (same as today) | $7,035 | $7,035 | Equal |
| 31.48% + 15% OAS recovery ≈ 46.5% | $5,350 | $7,035 | TFSA by $1,685 |
The third row matters for people who expect large pensions plus RRIF withdrawals: every dollar of RRIF income above the OAS recovery threshold ($95,323 for 2026, indexed) also reduces OAS by 15 cents. TFSA withdrawals do not count as income, so they never trigger OAS recovery, reduce the Guaranteed Income Supplement, or affect the age amount.
Practical rules of thumb
- Income below about $55,000 (Ontario, 19.05% or 23.15% band): a TFSA is usually at least as good, more flexible, and keeps benefits intact. An exception: parents receiving the Canada Child Benefit, where an RRSP deduction also raises the CCB; see the CCB guide.
- Income in the 29.65% band or higher, expecting lower retirement income: RRSP first, then TFSA with what is left. Investing the refund matters; spending it removes the RRSP's advantage.
- Buying a first home within 15 years: the FHSA combines the RRSP's deduction with the TFSA's tax-free withdrawal, so it usually comes first.
- Expecting high retirement income or a large estate: favour the TFSA; RRSP/RRIF balances are fully taxable on death unless rolled over to a spouse or a qualifying dependant.
- Need for flexibility: TFSA withdrawals can be re-contributed starting the next calendar year; RRSP withdrawals lose the room permanently (outside the HBP and LLP).
TFSA room rules for 2026
| Rule | Detail |
|---|---|
| Annual limit 2026 | $7,000 (it was $7,000 in 2024 and 2025 as well) |
| Cumulative room since 2009 | $109,000 for someone 18 or older and resident since 2009 who never contributed |
| Withdrawals | Added back to your room on January 1 of the following year |
| Eligibility | 18 or older (19 in provinces where that is the age of majority for contracts, with room still accruing from 18), Canadian resident, with a SIN |
| Over-contribution | 1% a month on the highest excess in each month; no buffer. See over-contribution penalties |
| Deduction | None; contributions are made with after-tax money |
Where the TFSA limit comes from, by year: $5,000 (2009 to 2012), $5,500 (2013 and 2014), $10,000 (2015), $5,500 (2016 to 2018), $6,000 (2019 to 2022), $6,500 (2023), $7,000 (2024 to 2026). The sum is $109,000.
CRA My Account shows your room as of January 1, but it may not include transactions from the current year. Keep your own record of deposits and withdrawals, especially if you move money between institutions: use a direct transfer, not a withdrawal and re-deposit, or the re-deposit uses new room.
What goes where
Because both accounts shelter income from tax, the question is also which investments to place in each:
- Interest-bearing investments (GICs, bonds, high-interest savings) are fully taxed outside registered accounts, so they benefit most from sheltering.
- Canadian eligible dividends get the dividend tax credit outside registered accounts; that credit is lost inside a TFSA or RRSP.
- Expected high-growth investments benefit most from a TFSA, where growth is never taxed.
- US dividends are subject to US withholding tax inside a TFSA; an RRSP is generally exempt under the Canada-US treaty. This is a detail to check with your institution.
To put a figure on tax-free growth versus a taxable account, use the TFSA vs taxable growth calculator; for the RRSP refund itself, the RRSP refund estimator.
Frequently asked questions
Should I use my RRSP refund to fund my TFSA?
That is a common and efficient approach for people in the 29.65% band or above: the RRSP gets the deduction and the refund starts tax-free growth in the TFSA.
Does TFSA income affect the Canada Child Benefit?
No. Income earned in a TFSA and withdrawals are not included in net income, so they do not reduce the CCB, the GST/HST credit (now the Canada Groceries and Essentials Benefit) or OAS.
Do Quebec residents get the same TFSA?
Yes. The TFSA is federal and Quebec also does not tax TFSA income.
What if I become a non-resident?
You keep the TFSA but cannot contribute while non-resident, and the other country may tax its income. Seek advice before you leave.
Official sources
- CRA: MP, DB, RRSP, DPSP, ALDA, TFSA limits and YMPE — TFSA limits by year
- CRA: 2026 indexation and benefit amounts — OAS recovery threshold
- Canada Revenue Agency — TFSA room in My Account
- Financial Consumer Agency of Canada — plain-language guides to registered accounts
