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Summary: The First Home Savings Account (FHSA) is a registered account for first-time buyers in Canada that combines tax-deductible contributions, tax-free growth, and tax-free withdrawals toward a first home. You can contribute up to $8,000 a year, to a $40,000 lifetime limit.
Buying your first home is a thrilling milestone, but the financial journey to get there can feel daunting. One of the biggest challenges is accumulating the down payment, and several tools exist to help. This guide focuses on the most recent one: the First Home Savings Account (FHSA). For the other incentives, such as the first-time home buyer Land Transfer Tax rebate, see our first-time home buyer incentives guide.
What is the First Home Savings Account?
The FHSA is a registered savings account, launched in 2023, that lets first-time buyers save toward a home with major tax advantages. It combines the tax-free growth of an RRSP with the tax-free withdrawals of a TFSA, specifically for a first home purchase.
The First Home Savings Account (FHSA) combines the tax-free growth features of a Registered Retirement Savings Plan (RRSP) with the tax-free withdrawal benefits of a Tax-Free Savings Account (TFSA), specifically tailored for saving for a first home. People who have not purchased a property before can accumulate savings to put toward their first purchase, and the money in an FHSA can be held in various investment products (mutual funds, GICs, stocks, and so on). It has three core benefits: tax deductibility, tax-free growth, and tax-free withdrawals.
What are the benefits of an FHSA?
The FHSA pulls in the best of the RRSP and the TFSA: contributions lower your taxable income, your investments grow without being taxed, and qualifying withdrawals come out tax-free.
Tax deductibility
When you contribute money to your FHSA, those contributions can reduce the income tax you owe. Any money you put into your FHSA is deducted from your taxable income. For example, if you earn $50,000 a year and contribute $5,000 to your FHSA, you'll be taxed as if you earned $45,000. For anyone familiar with the RRSP, the FHSA works the same way on tax deductibility, so the more you contribute, the less tax you pay now, growing your home savings faster while easing your tax burden each year.
Tax-free growth
Any earnings on your FHSA investments, such as interest, dividends, or capital gains, are not taxed as long as they stay in the account. In a regular account those earnings would be taxed each year, slowing growth. For example, if you invest $5,000 and it grows 5% in a year ($250), in a regular account you might pay tax on that $250; in an FHSA the full $250 stays and keeps compounding. This works like the main benefit of a TFSA.
Tax-free withdrawals
When you're ready to buy your first home, you can withdraw money from your FHSA without paying income tax on the withdrawals. Both the money you contributed and any gains it earned come to you tax-free, so every dollar goes toward your home purchase rather than to taxes. This is another feature shared with the TFSA, and it maximizes your purchasing power exactly when you need it.
Who is eligible for an FHSA?
Not everyone qualifies. To open an FHSA you need to meet several criteria:
Age. You must be 18 or older, and 71 or younger as of December 31 of the year you open the account.
Residency. You must be a resident of Canada. The Government of Canada has a residency-status checklist.
First-time homebuyer. You must qualify as a first-time homebuyer, meaning you did not live in a qualifying home as your principal residence that you owned or jointly owned in the year you open the account or in the previous four calendar years.
Spousal consideration. If you lived in a qualifying home as your principal residence that your spouse or common-law partner owned or jointly owned in that period, you would not be eligible.
If you meet these criteria you're ready to start, and it's worth not delaying so you maximize the tax-free growth that accumulates over time.
How much can you contribute to an FHSA?
The FHSA has annual and lifetime contribution caps, with room to catch up if you don't max out a given year.
Annual contribution limit. $8,000 per year, helping you build savings steadily toward your first home.
Lifetime contribution limit. $40,000 per individual, which keeps the FHSA targeted at saving for a first home rather than general investing.
Carry forward of unused room. If you don't contribute the full $8,000 in a year, you can carry the unused room forward to future years.
Contribution timing. Contributions can be made until the end of the calendar year in which you turn 71.
How do you open and manage an FHSA?
Opening an FHSA is straightforward. A step-by-step:
Determine your eligibility. Confirm you're at least 18, a Canadian resident, and a first-time home buyer (see the eligibility section above).
Choose a financial institution. Pick a bank, credit union, or other institution that offers the FHSA; most major Canadian banks do.
Gather documentation. Typically a government-issued photo ID, your Social Insurance Number (SIN), and proof of address (such as a utility bill or bank statement).
Open the account. Apply in person or online, providing your personal details and confirming eligibility.
Set up contributions. Fund it by regular direct deposit or lump-sum deposits, up to $8,000 annually and $40,000 lifetime.
File your income tax and benefit return. Tell the government you've opened an FHSA by filing Schedule 15 – FHSA Contributions in the year you open the account, even if you didn't contribute.
Monitor and manage. Track contributions so you don't exceed the limits, and manage the investments to match your risk tolerance and time horizon.
It's worth consulting a financial advisor on how the FHSA fits your broader plan; taking advantage of your RRSP and TFSA room helps too.
Frequently asked questions
Are FHSA contributions tax deductible?
Yes. Like RRSP contributions, money you put into an FHSA is deducted from your taxable income for that year, lowering the income tax you owe.
Are FHSA withdrawals taxed?
No, as long as the withdrawal is a qualifying withdrawal to buy your first home. Both your contributions and any investment gains come out tax-free.
How much can I put in an FHSA each year?
Up to $8,000 per year, with a $40,000 lifetime limit. Unused annual room carries forward to future years.
Who qualifies as a first-time homebuyer for the FHSA?
Generally, someone who did not live in a home they (or their spouse or common-law partner) owned as a principal residence in the year they open the account or in the prior four calendar years.
Do I have to report opening an FHSA on my taxes?
Yes. File Schedule 15 (FHSA Contributions) with your income tax and benefit return for the year you open the account, even if you didn't contribute that year.
Can I use an FHSA together with an RRSP or TFSA?
Yes. The FHSA is one part of a broader savings plan; many buyers also use RRSP and TFSA room toward their goal.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
At Ownright, we focus entirely on Ontario residential real estate law. We help buyers and sellers with purchase closings, sales, refinancing, and status certificate reviews through a digital platform that keeps you informed, backed by an in-house legal team you can reach by chat, email, or video call. When you're ready to close, you can start your closing online or get in touch with any questions.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
