How Canadians Can Achieve Tax Efficiency in 2025/2026

Table of contents

RRSP | RRIF | TFSA | FHSA | LIRA | RESP | Maximizing tax efficiency

Key takeaways:

  • Tax-advantaged accounts can help you reduce taxable income, grow your wealth tax-free, and strengthen your investment growth.
  • Understanding each account’s contribution limits, deadlines, and rules for taxable vs. non-taxable withdrawals is crucial to keeping more of your money at tax time.
  • Private alternative investments, like Skyline’s funds, may complement your portfolio by offering strong returns and additional tax advantages.

The 2025/2026 tax season is approaching, offering you a valuable opportunity to review your finances and optimize your tax strategy. Now is the time to maximize the benefits of the many tax-advantaged accounts available in Canada. With some thoughtful planning and smart investment decisions, you can use tax-advantaged accounts to help minimize your tax bill and grow your wealth for the future.

Whether you’re just starting to learn how to earn money by investing or already managing a well-diversified portfolio, understanding how tax-advantaged accounts work—and how to use them together—can make a big difference toward your long-term tax efficiency.

We’re summarizing six of the most popular tax-advantaged accounts in Canada: their key features, benefits, contribution limits, and rules for taxable vs. non-taxable withdrawals.

RRSP: A classic tool for tax-deferred growth

The Registered Retirement Savings Plan (RRSP) is one of the most powerful tools for retirement savings in Canada. Contributions are tax deductible, reducing your taxable income for the year, and investments grow tax deferred until withdrawal—ideally in retirement, when you’re in a lower tax bracket.

These RRSP advantages make the account an ideal choice if you’re in a higher tax bracket and want to defer taxes while building wealth.

Key features:

  • RRSP contribution limit: 18% of earned income from the previous year, up to the CRA’s annual maximum ($32,490 for 2025 and $33,810 for 2026).
  • RRSP contribution deadline: March 2, 2026. Contributions up to this date can count toward the 2025 tax year.
  • RRSP withdrawal rules: Early withdrawals are taxed as income, but the Home Buyers’ Plan (HBP) and Lifelong Learning Plan (LLP) allow limited tax-free withdrawals.

Get all the information you need to plan for your retirement with RRSPs.

RRIF: Turning savings into income for your golden years

As you transition to retirement, your RRSP must eventually convert into a Registered Retirement Income Fund (RRIF), a cornerstone of wealth management for seniors. The main difference between an RRSP and RRIF is that RRSPs accumulate savings, while RRIFs provide income in retirement. You must convert your RRSP to a RRIF by December 31 of the year you turn 71.

Investments within a RRIF continue to grow tax deferred, but you must begin mandatory annual withdrawals, which are taxable as income.

Key features:

  • RRIF minimum annual withdrawal: Increases with age (e.g., 5.28% at 71, 5.40% at 72).
  • No new contributions: Once you’ve converted to a RRIF, you can’t add more funds.
  • Spousal RRIFs: These RRIFs can balance income and reduce taxes for couples.

Learn more about smart retirement planning with RRIFs.

TFSA: Ultra-flexible, tax-free growth

The Tax-Free Savings Account (TFSA) is one of Canada’s most versatile savings tools and can be used for short- or long-term goals. Contributions are made with after-tax dollars, so there’s no deduction up front, but all investment income is completely tax-free, even upon withdrawal.

Your TFSA interest rate depends on the investment and provider. These accounts typically don’t generate much interest, so you may choose to hold higher-yield investments to potentially save faster.

Key features:

  • TFSA contribution limit: $7,000 for both 2025 and 2026. If you’ve been eligible for a TFSA since 2009 and you open one in 2026, your total contribution room is $109,000. Unused contribution room is cumulative and carries forward indefinitely.
  • TFSA withdrawal rules: You can withdraw funds anytime, for any reason. The withdrawn amount is added back to your contribution room the following year.
  • The power of compounding in a TFSA: Earnings are reinvested in full since they’re untaxed, creating exponential growth over time.

Find out more about maximizing tax efficiency with TFSAs.

FHSA: Faster saving for your first home

Introduced in 2023, the First Home Savings Account (FHSA) combines an RRSP and TFSA’s best features and is designed to help you save efficiently for your first home.

If you’re between 18 and 71, reside in Canada, and you and/or your spouse haven’t owned a home anywhere in the world for the past four years, you can open an FHSA.

Key features:

  • FHSA tax deduction: Contributions are tax deductible, like an RRSP—and withdrawals are also completely tax-free, like a TFSA.
  • FHSA contribution limit: $8,000 annually, up to a lifetime maximum of $40,000. Unused contributions carry forward to future years.
  • FHSA vs. TFSA: Both offer tax-free growth, but the FHSA is intended specifically for buying or building a first home.

Learn more about using an FHSA to make your homeownership dream a reality.

LIRA: Locking in your pension savings

If you’ve left a job with a pension, you may have encountered a Locked-In Retirement Account (LIRA). This account holds pension funds in Canada transferred from an employer-sponsored plan and cannot be withdrawn until retirement.

Wondering about LIRAs vs RRSPs? Both accounts grow tax-deferred, but LIRAs are “locked in” to preserve your pension until you reach retirement, while RRSPs allow early access (albeit with tax consequences). You also can’t make cash contributions to a LIRA, whereas you can contribute to your RRSP each year, up to the annual limit.

Key features:

  • Locking in your money for later: A LIRA ensures that your pension savings remain protected—and have the opportunity to grow through investments—until you’re ready to retire.
  • Governed by pension legislation: Withdrawals are restricted until you reach the eligible retirement age, ensuring your funds are preserved.
  • Conversion at retirement (typically 55+): When you retire, your LIRA must convert to a Life Income Fund (LIF) or annuity, providing you with steady income.

Learn more about using your LIRA to help grow your retirement savings.

RESP: Investing in your child’s future

The Registered Education Savings Plan (RESP) is the best way to save for a child’s education while taking advantage of government incentives.

RESP contributions aren’t tax deductible, but growth is tax deferred. RESP withdrawal rules specify that when funds are used for education, withdrawals are taxed to the student—usually at a low rate.

Key highlights:

  • Lifetime contribution limit: $50,000 per beneficiary.
  • Canada Education Savings Grant (CESG): 20% match on contributions up to $2,500 per year (maximum $7,200 per child).
  • Flexible beneficiary rules: Funds can be transferred to another child’s RESP if one child doesn’t pursue post-secondary education.

If you’re wondering whether RESPs are taxable when withdrawn, the answer is that only the income portion (not the contributions) is taxable, and it’s typically taxed at the beneficiary’s much lower rate.

Find out more about funding your child’s education with RESPs.

Bringing it all together: Maximizing tax efficiency in 2025/2026

Each tax-advantaged account serves a unique role in a well-balanced tax-efficient investment strategy:

  • Reduce taxable income with RRSP contributions—or FHSA funds if you’re buying a first home.
  • Grow investments tax-free in your TFSA.
  • Secure retirement income with RRIFs and LIRAs.
  • Support your family’s future through RESP savings.

With the right mix of accounts to suit your financial goals, you can build wealth efficiently while keeping more money in your pocket.

So, what makes a good investment in Canada for your tax-advantaged accounts? Beyond traditional investment options like stocks and bonds, Canadians are increasingly exploring private alternative investments to complement their portfolios. Private alternatives, like those offered by Skyline, can provide diversification and potential tax advantages.

Skyline’s investments, which specialize in real estate and renewable infrastructure, are eligible for all tax-advantaged accounts in Canada. These funds have demonstrated resilience through market cycles and offer a historical annualized return of 8-14%.1 Whether you choose to invest through an RRSP, RRIF, TFSA, FHSA, LIRA, RESP, or another account, Skyline’s funds may help you avoid unnecessary taxation and keep more of your money working for you.

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1 The performance quoted represents since inception. Full annualized return performance is as follows: Skyline Apartment REIT, 7.48% 1-year, 8.12% 3-year, 11.38% 5-year, 14.18% 10-year, 13.40% inception (June 1, 2006); Skyline Industrial REIT, 4.60% 1-year, 5.20% 3-year, 16.23% 5-year, 15.79% 10-year, 14.03% inception (January 10, 2012); Skyline Retail REIT, 8.26% 1-year, 7.76% 3-year, 10.18% 5-year, 12.34% 10-year, 11.68% inception (October 8, 2013); Skyline Clean Energy Fund, 9.01% 1-year, 9.16% 3-year, 9.26% 5-year, and 8.94% inception (May 3, 2018). Performance is for Class A of the funds and does not guarantee future results for Class F. All Skyline REIT’s figures as at September 30, 2025. Skyline Clean Energy Fund’s figures as at October 1, 2025.

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