The First Home Savings Account (FHSA) is a tax-advantaged savings plan introduced by the Canadian government in 2023 to help first-time homebuyers save for their first home faster. With tax-deductible contributions and tax-free withdrawals, it offers one of the most efficient ways to save for a down payment. Whether used alone or alongside the RRSP Home Buyers’ Plan, the FHSA can significantly boost your buying power and reduce the financial burden of entering the housing market.

What Is the FHSA?

The FHSA combines the benefits of both an RRSP (Registered Retirement Savings Plan) and a TFSA (Tax-Free Savings Account):

Contributions are tax-deductible (like an RRSP)
Withdrawals to buy a first home are tax-free (like a TFSA)

This means you get a tax break when you contribute, and you don’t pay tax when you withdraw, as long as it’s for a qualifying home purchase.

FHSA Contribution Rules

Annual contribution limit: Up to $8,000 per year
Lifetime limit: $40,000
Carry forward unused contribution room each year, up to $8,000 (starting after the account is opened)
Contributions must be made in cash (not in-kind transfers like stocks)

Who’s Eligible?

To open an FHSA, you must:

Be a Canadian resident
Be at least 18 years old
Be a first-time homebuyer (i.e., you haven’t lived in a home you owned in the current or previous 4 calendar years)

Using the FHSA to Buy a Home

You can use your FHSA to buy a qualifying home in Canada
The property must be your principal residence
Withdrawals used for the home purchase are completely tax-free
Must enter into a written agreement to buy or build a home before October 1 of the year following your withdrawal

FHSA vs. RRSP Home Buyers’ Plan (HBP)

Key Benefits of the FHSA

Tax savings twice: Get a deduction now and avoid tax later
No repayment unlike the RRSP Home Buyers’ Plan
Flexibility: If you don’t buy a home, you can transfer the funds to your RRSP or RRIF tax-free
Can be combined with other programs like the Home Buyer Plan (HBP), GST/HST new housing rebate, and land transfer tax refunds

I recommend consulting with a financial advisor or tax professional to determine if the First Home Savings Account (FHSA) is the right choice for your specific situation. Contact me if you would like a referral or would like to start looking for your first home.