What Is the FHSA (First Home Savings Account)?

The First Home Savings Account (FHSA) is one of the best tools a first-time buyer in Canada has. It blends the strengths of an RRSP and a TFSA — your contributions are tax-deductible, and when you withdraw to buy your first home, you pay no tax at all. Here's exactly how it works, the limits to know, and how it fits with other programs.

Key takeaways

• You can contribute up to $8,000 per year and $40,000 over your lifetime.
• Contributions are tax-deductible, lowering your taxable income like an RRSP.
• Qualifying withdrawals to buy your first home are completely tax-free.
• The FHSA can be combined with the RRSP Home Buyers' Plan for even more buying power.
• Money saved in an FHSA can go straight toward your down payment.

What is the FHSA?

The First Home Savings Account is a registered account designed specifically to help Canadians save for their first home. It launched as a way to give first-time buyers a tax-advantaged head start — and it's unusually generous because it offers a tax break both when you contribute and when you withdraw.

The double tax advantage

Most registered accounts give you one tax benefit. The FHSA gives you two:

• Going in: contributions are tax-deductible, reducing your taxable income for the year — just like an RRSP.
• Coming out: qualifying withdrawals to buy your first home are tax-free — just like a TFSA.
• In between: investments inside the account grow tax-sheltered.

The deduction can be carried forward

You don't have to claim the deduction the same year you contribute. Like an RRSP deduction, you can carry it forward to a year when your income — and your tax savings — are higher.

How the limits work

You can put in up to $8,000 each year, to a $40,000 lifetime maximum. If you contribute less than $8,000 in a year, you can carry forward unused room (subject to the annual rules), so it pays to open an account early even if you can't max it out right away.

FHSA vs the RRSP Home Buyers' Plan

Both help first-time buyers, but they work differently. The FHSA money is yours to keep with no repayment, while the RRSP Home Buyers' Plan is effectively a tax-free loan from your RRSP that you repay over 15 years.

The good news: you can use both. Combined, a single buyer can access up to $100,000 toward a down payment. See how all the options fit together in our roundup of first-time home buyer programs in Canada.

Putting your FHSA to work

When you're ready to buy, the funds in your FHSA can go directly toward your down payment. A larger down payment shrinks your mortgage and can reduce or eliminate CMHC insurance. For the full buyer journey, see our first-time home buyer guide for Ontario.

Stretch your savings even further

On top of your FHSA, eligible HOMEH buyers receive the industry's highest Cashback Rebate — more money toward your home. Plan your down payment with the down payment calculator or estimate your rebate with the cashback calculator.