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Your 2025 Tax Hack: Using TFSA Withdrawals to Supercharge FHSA, RRSP & RESP

Olu Olu
Dec 1, 2025
2 min read

Updated: Jan 12

Imagine a Manitoban earning $100,000 in 2025 with the following starting balances:

FHSA: $5,000
RRSP: $20,000
RESP: $10,000
TFSA: $25,000

The Manitoba combined federal and provincial marginal tax rate on income over roughly $57,375 is about 33.25%. Now, let's get back some taxes...

The Hack

Registered Account Type	2025 Contribution Limit	Base Scenario (No Action)	Preferred Scenario (Using TFSA Withdrawals to Fund Contributions)	Explanation
TFSA	$7,000	No withdrawals; balance stays $25,000	Withdraw $15,500 total (5k, 8k, 2.5k - see below); balance reduces to $9,500 (room restored next year)	TFSA withdrawals are tax-free but reduce immediate balance; contribution room returns next year
FHSA	$8,000	No new contribution; balance stays $5,000	Use $5,000 from TFSA; contribute $5,000 to FHSA	FHSA contributions reduce taxable income by $5,000 giving tax savings of $1,662.50 (33.25%)
RRSP	$18,000 (18% of income)	No new contribution; balance stays $20,000	Use $8,000 from TFSA; contribute $8,000 to RRSP	RRSP contributions reduce taxable income by $8,000 saving $2,660 in taxes
RESP	No annual limit, grant max $2,500	No new contribution; balance stays $10,000	Use $2,500 from TFSA; contribute $2,500 to RESP	While no tax deduction, eligible for 20% government grant worth $500

Tax Savings and Government Benefits Breakdown

Account	Contribution	Tax Deduction/Grant	Cash Value of Benefit Received
FHSA	$5,000	Tax deduction	$1,662.50
RRSP	$8,000	Tax deduction	$2,660
RESP	$2,500	Government grant	$500
Total	$15,500		$4,822.50

What Does This Mean?

In the Base Scenario, the individual makes no additional contributions or withdrawals, missing out on valuable tax deductions and government grants.
In the Preferred Scenario, strategically using TFSA withdrawals to contribute to FHSA, RRSP, and RESP unlocks $4,822.50 in immediate tax savings and grants, accelerating wealth growth and reducing tax burden. That means 31% gains in free money.
The reduction in the TFSA balance is temporary because contribution room lost through withdrawals is restored the following year, preserving long-term tax-free growth potential.
Contributions also grow tax-sheltered or tax-free depending on the account/ investments selected, enhancing compounding benefits beyond immediate savings.

Note: Actual results will vary by individual and may be higher or lower than 31%, depending on their income level, marginal tax rate, deductions, and overall tax position with the CRA.

Also be aware of the tax rules for the various registered accounts as summarized below.

Summary

By intelligently syncing contributions to and withdrawals from registered accounts using the flexibility of a TFSA, you can significantly increase your tax savings and take advantage of government incentives. This strategy creates a strong foundation for building wealth more efficiently compared to simply leaving funds idle. Also note that the contributions for this strategy can come from other sources other than a TFSA. Reach out now before December 31 2025 to review your current tax savings strategy, if you have one, and address any gaps to avoid unpleasant tax bill surprises. You can also read some related blogs on financial planning, managing finance and canadian financial realities.