What Is an FHSA? Canada's First Home Savings Account

The First Home Savings Account (FHSA) is a Canadian registered account built for one job: helping you save for your first home. It's unusually generous because it combines the best feature of an RRSP with the best feature of a TFSA.

The double tax break

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

• Money going in is tax-deductible — like an RRSP, your contributions lower your taxable income for the year.
• Money coming out is tax-free — like a TFSA, when you withdraw to buy a qualifying first home, you pay no tax on the contributions or the growth.

Contribution limits

The FHSA has both an annual and a lifetime cap:

• $8,000 per year, up to a $40,000 lifetime maximum.
• Carry-forward: you can carry forward up to $8,000 of unused room to the next year — so if you skip a year, you could contribute up to $16,000 the following year (but no more than one year's room accumulates at a time).
• Investment growth doesn't count against the $40,000 — only the money you put in does.
• Your room only starts building the year you open the account, so opening one early (even with $0) starts the clock.

Who qualifies

You generally need to be a Canadian resident, at least 18, and a first-time home buyer (you haven't owned a home you lived in during the current year or the previous four calendar years). An FHSA can stay open for up to 15 years or until the end of the year you turn 71.

What if you don't end up buying?

The money isn't stuck. If you don't buy a qualifying home, you can transfer the FHSA into your RRSP or RRIF tax-free, and it won't use up your RRSP room. So the downside of opening one is small.

How people invest an FHSA

An FHSA can hold cash, but it can also hold investments like ETFs, stocks and funds — the same choices as a TFSA or RRSP. Because a first-home timeline can be short, many people keep an FHSA more conservative than a long-term retirement account. This is a description of how the account works, not advice on what to hold — your timeline and risk tolerance decide that. See TFSA, RRSP and the TFSA-vs-RRSP comparison, and get started with our free investment growth calculator.

Contribution limits are set by the CRA and can change; check your CRA My Account for your exact personal room.

FHSA vs the RRSP Home Buyers' Plan

Canada has a second first-home tool: the Home Buyers' Plan (HBP), which lets you withdraw up to $60,000 from your RRSP tax-free to buy or build a first home. The catch is that the HBP is essentially a loan from yourself — you must repay it to your RRSP over 15 years, starting the second year after you withdraw, or the missed amount is added to your taxable income.

The FHSA is usually simpler: withdrawals for a qualifying home are tax-free with no repayment. You don't have to pick just one, though — many first-time buyers use the FHSA first, then top up with the HBP if they need more than the FHSA holds. Stacking both can free up a sizeable tax-advantaged down payment.

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