First Home Savings Account (FHSA) at a Glance
Buying your first home is a big milestone and saving for it can feel overwhelming. That’s where the First Home Savings Account (FHSA) comes in. It’s a government-registered account created to help Canadians take that exciting first step toward homeownership. It blends the best of both worlds—RRSP-style tax deductions when you contribute, and TFSA-like tax-free withdrawals when you're ready to buy—so your savings can go further, faster.
Key Benefits
- Tax deduction now: Contributions are generally tax-deductible, lowering your taxable income in the year you contribute.
- Tax-free growth: Investments inside the FHSA grow tax-free.
- Tax-free withdrawals for a home: Qualified withdrawals to buy or build your first home are not taxed.
- Flexibility: If you do not end up buying a home, funds can be transferred to an RRSP or RRIF tax-free.
Who Can Open and Use an FHSA?
- Canadian residents aged 18 to 71 (or age of majority in your province or territory).
- Must be a first-time homebuyer (i.e. you or your spouse or common-law partner have not lived in a home you owned in the current year or previous four years).
Contribution & Deduction Limits
- Annual limit: $8,000 per year.
- Lifetime limit: $40,000.
- Carry-forward: Unused contribution room can be carried to future years, once the account is opened, with a maximum carry-forward amount of $8,000.
- Contributions must be made by December 31 each year to be deducted on the current year’s return or carried forward to be deducted in a future year.
- FHSA contributions are separate from RRSP contributions and do not reduce RRSP room.
- Qualified FHSA withdrawals do not count as income, so they won’t affect benefits like GST/HST credits or the Canada Child Benefit.
Withdrawals
- Qualified withdrawals used to buy or build your first home are completely tax-free.
- Non-qualified withdrawals are taxable at your marginal rate and subject to withholding tax.
- You must close your FHSA by the end of the year following your first qualifying FHSA withdrawal, within 15 years of opening, or by age 71 — whichever comes first.
FHSA and the Home Buyers’ Plan: How Do They Compare?
In addition to the FHSA, first-time homebuyers may also consider the Home Buyers’ Plan (HBP)—a long-standing program that allows you to withdraw funds from your RRSP to help buy or build a qualifying home. While both the FHSA and HBP offer tax advantages, they work differently. The HBP requires repayment over time, whereas FHSA withdrawals are tax-free and do not need to be repaid.
FHSA vs Home Buyers’ Plan (HBP)
| Factor | FHSA | RRSP HBP |
|---|---|---|
| Withdrawal limit | Up to $40,000 (plus growth) | Up to $60,000 |
| Repayment | No repayment required | Must be repaid over 15 years |
| Taxation of withdrawals | Tax-free | Taxable if not repaid |
| Contribution type | New contributions (separate from RRSP) | Uses existing RRSP savings |
Quick Tips
- Open an account: Contribution room only begins once you open an FHSA.
- Mind the limits: Over-contributions are taxed at 1% per month until corrected.
- Plan ahead: The account must be used within 15 years, or by age 71.
- Combine strategies: You can use both the FHSA and HBP together for a larger down payment.
Additional Considerations
- If you open an FHSA and become a non-resident of Canada, you cannot make a qualifying withdrawal to buy or build a home as a non-resident. In addition, an FHSA may be considered taxable in your new country. Speak with your financial advisor about planning opportunities before leaving Canada such as transferring to an RRSP.
- If you are a U.S. person (i.e. a U.S. citizen, green card holder or U.S. resident), there are additional tax implications that you should be aware of as the IRS does not recognize the tax-free nature of FHSA accounts. Speak with your tax advisor to determine if holding an FHSA is right for you.
The FHSA is a powerful new tool for first-time homebuyers. It offers the up-front tax deduction of an RRSP and the tax-free withdrawals of a TFSA, making it one of the most effective ways to save for a down payment. Used together with an RRSP (via HBP) or TFSA, it can accelerate your path to homeownership.
Securities-related products and services are offered through Raymond James Ltd. (RJL), regulated by the Canadian Investment Regulatory Organization (CIRO) and a Member of the Canadian Investor Protection Fund. RJL financial/investment advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not regulated by CIRO and is not a Member of the Canadian Investor Protection Fund. Solus Trust Company (“STC”) is an affiliate of Raymond James Ltd. and offers trust services across Canada. STC is not regulated by CIRO and is not a Member of the Canadian Investor Protection Fund.
