In Canada, several registered accounts can help you achieve your personal finance goals. Whether you are saving for a home or retirement or looking to maximize tax-free investment opportunities, these registered accounts can help you save and grow your money significantly.
To fully benefit from these accounts, consider transferring money from one registered account to another to maximize your tax savings.
Let’s dive into everything you need to know about transferring between various registered accounts, such as the TFSA, RRSP and FHSA.
Key Point Overview
| Transfer Type | Tax Implications | Impact on Contribution Room |
|---|---|---|
| RRSP to TFSA | – Must withdraw funds from RRSP which is taxed at marginal tax rate | – RRSP contribution room is lost permanently. – TFSA contribution uses annual limit. |
| TFSA to RRSP | – Must withdraw funds from TFSA (No tax impact) – Funds transferred to RRSP is a tax-deductible (can reduce taxable income). | – Regain TFSA contribution room the next year. – Transferred funds use RRSP contribution room. |
| RRSP to FHSA | – Direct transfer from RRSP to FHSA has no tax implications | – RRSP contribution room is lost permanently. – FHSA room is reduced by the transferred amount. |
| TFSA to FHSA | – Must withdraw funds from TFSA which is tax-free. – Funds contributed to FHSA is tax-deductible. | – Regain TFSA contribution room the next year. – FHSA room is reduced by the transferred amount. |
What Are Registered Accounts?
A registered account is an investment account that is given tax-deferred or tax-sheltered status by the government. RRSPs, RRIFs, RESPs, TFSAs and FHSAs are examples of registered accounts in Canada.
Can You Transfer Money From Your RRSP To A TFSA?
Yes, you can transfer money between these two registered accounts, however, you must first withdraw the money from your RRSP. Unfortunately, like transferring from a TFSA to an RRSP, you cannot transfer your account in kind. Funds from your RRSP must be withdrawn, and then the cash may be transferred to a TFSA.
Unfortunately, withdrawing from your RRSP has many tax implications, so it’s generally not recommended.
| What Does In-Kind Mean? In-kind allows you to transfer securities such as stocks, bonds, and ETFs as is (without selling them) to another account. |
Tax Consequences: Transfer Money From An RRSP To A TFSA
When you withdraw from your RRSP, you lose your contribution room forever, and your withdrawal will be taxed at your marginal tax rate.
Moreover, the amount you contribute to your TFSA counts toward your annual TFSA limit and is not tax-deductible. However, the money grows tax-free inside the account.
Should You Do This?
Generally, transferring from an RRSP to a TFSA is not recommended because you’ll pay tax when you withdraw from your RRSP. However, there are some cases where it makes sense:
- If you’re in a lower tax bracket now and expect to be in a higher bracket later, it could be worth taking the tax hit now to enjoy tax-free withdrawals in the future.
- If you need access to cash tax-free later, moving funds to your TFSA allows for easier withdrawals.
Learn more: RRSP Guide In Canada
Can You Transfer Money From Your TFSA To Your RRSP?
Yes! You can move money from a TFSA to an RRSP, however, you cannot transfer a TFSA to an RRSP in kind. You must first withdraw the funds as cash and then contribute them to your RRSP.
You’ll need to report the RRSP contribution on your tax return to claim a deduction.
Effect Of Transferring Your Money From A TFSA To An RRSP
When you transfer money from a TFSA to an RRSP, it’ll have an impact on your contribution room and your taxes.
What Happens To Your TFSA?
When you withdraw from your TFSA, you’ll regain your TFSA contribution room in the following calendar year. Let’s use an example to illustrate this:
- Let’s assume you maxed out your TFSA contribution room in May 2025 ($7,000).
- You made a withdrawal of $3,000 in August 2025.
In this scenario, you cannot make any more contributions in 2025. You’ll regain your contribution room of $3,000 on Jan 01, 2026, since you already contributed to the limit in 2025. So in 2026, you’ll be able to contribute $3,000 plus the new TFSA contribution room for 2026.
Note, that there are no tax implications for withdrawing from your TFSA. All withdrawals are tax-free and are not considered taxable income.
Learn more: Tax-Free Savings Account (TFSA): What You Need To Know
What Happens To Your RRSP?
When you withdraw from your TFSA to contribute to your RRSP, it will reduce your available RRSP contribution room.
Moreover, your RRSP contributions provide an immediate tax deduction, reducing your taxable income for the year.
Should You Do This?
Transferring money from your TFSA to your RRSP can be a smart move if:
- You want to lower your taxable income (especially if you’re in a higher tax bracket).
- You have an unused RRSP contribution room and want to save for retirement.
- You want to regain TFSA contribution room for future investments.
This strategy immediately reduces income tax and allows you to regain your TFSA contribution room. If you haven’t maxed out your RRSP deductions and have some spare cash sitting in your TFSA account, you can use those funds to invest in your RRSP and get significant tax savings.
Can You Transfer Funds From Your RRSP To A FHSA?
Yes! You can transfer funds directly from your RRSP to your FHSA, either in cash or in-kind. This can be a great option if you’re planning to buy your first home and want to take advantage of the tax-free withdrawals.
However, you’ll need to make a direct transfer to avoid any immediate tax consequences. A direct transfer means the transfer from your RRSP to your FHSA is completed directly by the financial institution(s) involved. You cannot withdraw money from your RRSP and then contribute to your FHSA.
Instead, to complete a direct transfer, you need to fill out Form RC720: Transfer from your RRSP to your FHSA and submit it to your financial institution. They will process the transfer without requiring you to withdraw the funds first.
What Happens When You Transfer Money From An RRSP To A FHSA?
When you complete a direct transfer from your RRSP to your FHSA, a few things will happen:
- When you transfer funds from your RRSP to your FHSA, your RRSP contribution room will remain the same. You do not regain the RRSP contribution room when you transfer funds from your RRSP to your FHSA.
- The amount you transfer reduces your available FHSA contribution room.
- Regular FHSA contributions are tax-deductible, but transfers from your RRSP to your FHSA are NOT tax-deductible.
Learn more: What Is The First Home Savings Account (FHSA)?
Should You Do This?
Here are some benefits of transferring from your RRSP to your FHSA:
- Tax-free growth: Money in an FHSA grows tax-free, just like in an RRSP or TFSA.
- Tax-free withdrawal for a first home: If you use your FHSA funds to buy a home, you won’t owe taxes on the withdrawal.
- No impact on RRSP room: If you don’t use your FHSA, you can transfer the money to your RRSP or RRIF without affecting your RRSP contribution room.
The key here is that if you are planning on making a first home purchase, you can draw out funds from the FHSA without any tax implications! This is the edge your FHSA has over your RRSP, which may charge withholding taxes.
Note: You can also withdraw funds from your RRSP for your first home purchase up to the tune of $60,000 under the Home Buyers’ Plan, which can be stacked on top of funds from your FHSA.
Can You Transfer From Your TFSA To Your FHSA?
Similar to transferring funds from your TFSA to your RRSP, you must first withdraw the money from your TFSA and then contribute it to your FHSA.
What Happens When You Transfer Money From An TFSA To An FHSA?
- Tax Free Withdrawls. When you withdraw from your TFSA to contribute to your FHSA, the withdrawals are tax-free.
- Regain TFSA Contribution Room. When you withdraw from your TFSA, you regain the TFSA contribution room, but only in the next calendar year.
- Reduce Income Tax. The contributions you make to your FHSA will use your contribution room and can be claimed to reduce your taxable income.
Should You Do This?
This can be a great option if:
- You have extra TFSA money and want to save for a home.
- You want to reduce your taxable income with FHSA deductions.
- If you don’t use your FHSA, you can move it to your RRSP without affecting your RRSP contribution room.
Bottom Line
Transferring money between registered accounts can be beneficial if done strategically. The key is to consider your tax situation, contribution limits, and long-term goals before making a move.
If you’re saving for a home, moving RRSP or TFSA funds into an FHSA can be a great choice. If you want to maximize tax deductions, moving TFSA funds into an RRSP or FHSA makes a lot of sense. However, transferring from an RRSP to a TFSA usually isn’t ideal due to tax consequences.
