The new year brings some notable increases in savings and pension plan limits from the Canada Revenue Agency (CRA) – and a couple notable freezes.
Registered retirement savings plan (RRSP)
The RRSP contribution limit for 2026 has increased to $33,810 from $32,490 in 2025.
The amount is calculated as 18 per cent of your previous year’s income up to the maximum, plus any unused contribution room carried forward.
RRSPs permit investments to grow tax free until funds are withdrawn in retirement; ideally at a low marginal rate.
You can find your specific limit on your Notice of Assessment or through the CRA’s My Account.
It’s important to note, exceeding the limit can result in a penalty.
Tax free savings account (TFSA)
As of Jan. 1, adults in Canada can add another $7,000 in contribution space to their tax free savings accounts (TFSAs).
That’s in line with the $7,000 expansion each year for the past two years, making the total contribution limit for eligible investors who have never contributed to their TFSA since its introduction in 2009 to $109,000.
Eligible investments held in a TFSA can grow tax-free and be withdrawn any time. The total contribution limit could be much higher than $109,000 for TFSA investors who have made gains and withdrawn funds over the years because the amount withdrawn is restored as contribution space the following calendar year.
Keeping track at any given time can be challenging; especially considering annual allowable amounts have varied through the years to track inflation. Tabulating limits can become mind-boggling for TFSA holders with active accounts through multiple financial institutions or employers.
Individual TFSA holders are ultimately responsible for keeping track. The Canada Revenue Agency (CRA) normally lists allowable space for individuals on its My Account Portal, but the amount might not be right because it is the responsibility of the financial institution to keep the CRA up-to-date.
In most cases the correct amount is not updated until later in the Calendar year. This year, TFSA information was not updated until June or later in some cases.
Over-contributions could result in a penalty of one per cent of the excess amount monthly, which compounds over time.
Registered education savings plan (RESP)
The federal government continues to offer relief for young parents through a savings and investment plan called a registered education savings plan (RESP).
Despite the skyrocketing cost of post-secondary education, the lifetime contribution limit of $50,000 and the lifetime grant limit of $7,200 has not changed since 2007.
Regardless, the RESP remains one of the best ways to finance a child’s education for parents who start saving early.
The plan matches annual contributions from a parent by 20 per cent up to $500.
Unlike registered retirement savings plans (RRSPs), which have decades to grow, RESPs only have up to an 18-year time horizon. That means the money in the plan needs to be invested for a shorter period of time, to be withdrawn over a short period of time.
The money can also be invested in just about anything like a RRSP and TFSA.
The contributions and grants grow tax-free while in an RESP, but unlike an RRSP they can’t be deducted against a parent’s income. Instead, it is taxed when withdrawn in the hands of the low-income student who is typically taxed at a lower marginal rate.
If a child decides not to continue after high school or if too much money is accumulated, you will have to pay tax on the money earned in the plan as interest. This money is called “accumulated income.” It will be taxed at the parent’s regular income tax level, plus an additional 20 per cent. At that point the money that the parent puts into the RESP is returned.
The Canada Education Savings Grant can be shared with a brother or sister if they have grant room available – otherwise, the grant must be returned to the Government of Canada.
First home savings account (FHSA)
With the average Canadian home price topping half-million dollars, Ottawa will continue to offer the FHSA as a way for first-time home buyers to save up to $40,000 toward a down payment. Annual contributions are capped at $8,000.
FHSA withdrawals used to purchase a first home are tax free.
The FHSA has the combined tax perks of an RRSP and TFSA. Contributions are tax deductible (like an RRSP) and gains on the investments are never taxed (like a TFSA) as long as the funds are used for the purchase of a first home.
Like RRSPs, the higher your income, the bigger the tax savings. Like TFSAs, the tax savings depend on how well the investments do.
Like an RRSP and TFSA, contributions in a FHSA can be invested in just about anything but the real challenge is how to invest for a potentially short and shifting time horizon.
