The First Home Savings Account (FHSA) launched in April 2023 and is already one of the most powerful savings tools available to Canadians. It combines the best features of both the RRSP and the TFSA — and if you’re planning to buy your first home, it should be the first account you open. Here’s everything you need to know.
What Is the FHSA?
The FHSA is a registered savings account designed specifically for first-time homebuyers. It allows you to save for a down payment with two major tax advantages:
- Contributions are tax-deductible — just like an RRSP, contributions reduce your taxable income in the year you contribute
- Qualifying withdrawals are tax-free — just like a TFSA, when you use the funds to buy your first home, you pay no tax on the withdrawal or the growth
This combination — deductible contributions and tax-free withdrawals — makes the FHSA uniquely powerful. With an RRSP, withdrawals are taxable. With a TFSA, contributions aren’t deductible. The FHSA gives you both advantages simultaneously.
FHSA Contribution Limits
- Annual limit: $8,000 per year
- Lifetime limit: $40,000
- Carry-forward: Unused annual room from the prior year carries forward once — so if you contribute $0 in year one, you can contribute up to $16,000 in year two
- No income requirement: Unlike the RRSP, you don’t need earned income to generate FHSA room
Over-contributions are subject to a 1% per month penalty tax — same as RRSP and TFSA over-contributions.
Who Is Eligible?
To open and contribute to an FHSA, you must:
- Be a Canadian resident
- Be at least 18 years old
- Be a first-time homebuyer — meaning you have not owned a qualifying home that you lived in at any point during the current calendar year or the preceding four calendar years
Note: If you owned a home more than 5 years ago but have been renting since, you may qualify as a first-time buyer again.
How to Make a Qualifying Withdrawal
To withdraw from your FHSA tax-free to buy a home, you must:
- Be a first-time homebuyer at the time of withdrawal
- Have a written agreement to buy or build a qualifying home before October 1 of the year after the withdrawal
- Intend to occupy the home as your principal place of residence within one year of purchase or construction
- The FHSA must have been open for at least one calendar year before the qualifying withdrawal
What Happens If You Don’t Buy a Home?
The FHSA doesn’t disappear if your plans change. If you haven’t used the funds for a qualifying home purchase by the end of the 15th year after opening the account (or by December 31 of the year you turn 71), you have two options:
- Transfer to your RRSP or RRIF — tax-free, without affecting your RRSP contribution room
- Withdraw as income — taxed in the year of withdrawal
The RRSP transfer option is particularly attractive — it means you can use the FHSA as a bonus RRSP contribution vehicle even if you never buy a home.
FHSA + Home Buyers’ Plan: Using Both Together
First-time buyers can use both the FHSA and the Home Buyers’ Plan (HBP) for the same purchase. The HBP allows you to withdraw up to $60,000 from your RRSP tax-free (to be repaid over 15 years). Combined with the $40,000 FHSA lifetime limit, a first-time buyer could access up to $100,000 in tax-sheltered savings for a down payment.
Strategy: Open Your FHSA Now, Even If You’re Not Ready to Buy
The FHSA’s carry-forward rule only kicks in once the account is open. That means the sooner you open the account, the more room you accumulate. If you open an FHSA today but don’t contribute until next year, you’ll have $16,000 of room available — not just $8,000.
Opening an FHSA now, even with a minimal contribution, starts the clock on the 15-year window and the carry-forward accumulation.
FHSA vs. RRSP HBP vs. TFSA for a Down Payment
- FHSA: Best option if you qualify — deductible contributions + tax-free withdrawals. Use first.
- RRSP HBP: Good complement — access up to $60,000 tax-free but must repay over 15 years
- TFSA: No deduction on contributions but withdrawals are tax-free and flexible with no repayment requirement
Planning your first home purchase in Ottawa or across Canada? Contact CMP Accounting — we can help you structure your FHSA, RRSP, and TFSA contributions to maximize your down payment and minimize your tax bill.