The FHSA turns three

When the First Home Savings Account (FHSA) was launched in April 2023, prospective homeowners reacted quickly. In its first years, well over 700,000 Canadians opened an FHSA annually.

Now you could choose a unique account that offers tax-free growth and tax-free withdrawals, like a Tax-Free Savings Account (TFSA), and a tax deduction for your contributions, like a Registered Retirement Savings Plan (RRSP).

FHSA strategies

As the FHSA has become a mainstay among future homeowners, several strategies have emerged to make the most of the account. Here are some common tips and tactics.

Using TFSA funds.

If you have a TFSA, you can withdraw funds from your TFSA and contribute them to your FHSA. This transaction gives you a tax deduction in the amount of your contribution.

Leveraging the tax refund.

You can take your FHSA tax refund or tax savings from the previous year’s contribution and contribute that amount to your FHSA in the current year.

If you’ll already be contributing the maximum amount to your FHSA, you can invest your FHSA tax refund or tax savings in your TFSA. You can later apply TFSA funds to your down payment.

Carrying forward the tax deduction.

If you’re a student or just starting out in your career, the tax deduction may not offer significant tax savings. However, you can carry forward the tax deduction to any future year to save more tax when you’re in a higher tax bracket. 

Using the RRSP Home Buyers’ Plan (HBP).

You can use the FHSA and HBP together. If you make the maximum contributions to an FHSA and access the full $60,000 from the HBP, you have $100,000 plus growth in the FHSA to help make a down payment.

The HBP can also benefit someone who opened an FHSA, did not buy a home within 15 years and transferred their FHSA assets to their RRSP. They can use the HBP if they wish to buy a home in the future.

Already approaching your goal.

Some prospective homeowners may want to open an FHSA even if they’re already close to achieving their down payment goal. Although they’ll have little time to benefit from tax-free growth, they can take advantage of the FHSA’s tax deduction for their contributions.

Carefully consider your start date.

You’re eligible to open an FHSA at age 18 or 19, depending on the province, but keep in mind that you can only keep the account open for a maximum of 15 years. Starting early gives your investments greater potential for long-term growth, but you should feel confident that the time frame works for you. Note that four in 10 first-time home buyers in Canada are older than age 35.¹

Respecting your time horizon. 

When you’re only a few years away from when you expect to buy a home, you should typically invest conservatively, even if the stock market is on a bull run. Your home may be the largest purchase of your lifetime, and all it takes is a plunging market at the worst time to put your financial goal at risk. Keep in mind that even when you choose low-risk investments, you still benefit from the valuable tax deduction on your contributions.

The FHSA at a glance

Eligibility. You must be a resident of Canada, have reached the age of majority in your province and qualify as a first-time home buyer.

Account duration. An FHSA can remain open for up to 15 years (or until the end of the year you turn 71).

Contributions. You can contribute up to $8,000 annually, with an account maximum of $40,000. If you contribute less than $8,000 in any year, you can carry forward the unused amount to a future year—but you cannot contribute more than $16,000 in any given year.

Investments. You can hold the same types of investments allowed in an RRSP or TFSA, including mutual funds, ETFs, publicly-traded securities, fixed-income investments and GICs.

Tax treatment. Contribution amounts are deductible from taxable income for the current tax year or any future year. Assets grow tax-free, and withdrawals are tax-free.

When an FHSA isn’t used. If you don’t use your FHSA assets to buy a home, you can transfer the funds tax-free to your RRSP without affecting your RRSP contribution room. Otherwise, FHSA withdrawals are taxable as income.

 

¹ Canada Mortgage and Housing Corporation, “CMHC Mortgage Consumer Survey,” 2025