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Everyone dreams about buying their first home. A First Home Savings Account (FHSA) is an investing account designed to help make those dreams a reality. FHSAs combine some of the tax advantages of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA) into one flexible account. Contributions to an FHSA are tax-deductible, and funds used to buy a qualifying first home can be withdrawn tax-free.
This article will outline key things you may consider about FHSAs and the steps you can take today to help make your wish of owning a home come true.
How FHSA works in Canada?
An FHSA combines some of the features of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). Like an RRSP, contributions made to an FHSA are generally tax-deductible. Funds from a TFSA can be withdrawn tax free (with some exceptions). FHSAs are similar in that you can withdraw the funds tax free for the purpose of buying a qualifying home.
FHSAs have an annual contribution limit of $8,000 and a lifetime contribution limit of $40,000 and they can be an important part of a first-time homebuyer’s down payment savings strategy.
FHSAs can remain open for up to 15 years, or until Dec. 31 the year you turn 71. The money in an FHSA can be used to buy a new home. be transferred to an RRSP or a Registered Retirement Income Fund (RRIF) account, or withdrawn (though withdrawals will be subject to taxes).
Benefits of FHSA
The First Home Savings Account (FHSA) offers several supportive features designed to help Canadians work toward homeownership with greater confidence. The FHSA combines tax efficiency and flexibility to help make saving for a first home more accessible.
- Tax-Free Growth: Contributions to your FHSA are generally tax-deductible, and investment growth within the account tax-free. This means more of your money can go account generally stays toward your home purchase.
- Flexible Contributions: The FHSA allows you to contribute up to $8,000 each year, with a lifetime limit of $40,000. Unused contribution room (up to $8,000) can be carried forward, giving you flexibility to save at your own pace.
- Tax-Free Withdrawals for Your First Home: When you’re ready to buy your first qualifying home, you can make a withdrawal from your FHSA for that purpose, tax-free.
- No Impact on Other Programs: You can combine the FHSA with programs like the Home Buyers’ Plan (HBP) and other registered plans, like the TFSA, offering more options as you plan for your purchase.
- Clear Pathway for New Buyers: The FHSA is designed for individuals who haven’t owned a qualifying home in the current or past four calendar years, providing a dedicated resource for newcomers to the housing market.
FHSA eligibility criteria
To be eligible for an FHSA you must be:
- A Canadian resident
- Between 18, or the age of majority in your province or territory and Dec. 31 the year you turn 71 years old1
- A qualified first-time homebuyer
A first-time homebuyer includes anyone who has not lived in a home owned by them, their spouse or common law partner, either in the current year before the account is opened or in any of the preceding four calendar years. Owning a rental property doesn’t make you ineligible for an FHSA, so long as you’ve never lived in that property. However, living in a home held by a trust or other intermediary can make you ineligible for an FHSA. While you can have multiple FHSA accounts, you can only use an FHSA to buy a home once in your lifetime.
Contribution limits and withdrawals for an FHSA in 2026
FHSAs have a lifetime contribution limit of $40,000. You can have more than one FHSA, but the total amount contributed cannot be more than the lifetime limit of $40,000.
Annual contributions are capped at $8,000, but unused amounts can be carried over to the next year to a maximum of $8,000. Any contributions exceeding the maximum are taxed at a 1% rate per month (until they are removed).
FHSA contribution deadline
Unlike an RRSP, all contributions to an FHSA must be made by December 31st. Contributions made within the first 60 days of the calendar year cannot be claimed as part of the previous tax year.
Unlike a TFSA and RRSP, you start to earn contribution room only after opening the account.
Tax rules for FHSA
The FHSA combines some of the tax advantages of an RRSP and TFSA into one account. Contributions are generally tax-deductible while qualified withdrawals are generally tax-free.
You can claim the deduction in the year you made the contribution or carry the deduction over to a future tax year. So, if you open an FHSA when you are a student (in a low-income bracket), you can wait until you get a job to claim the deduction.
Unlike the Home Buyers’ Plan (HBP), withdrawals from an FHSA do not have to be repaid. Contributions made to an FHSA after a qualifying withdrawal will not be deducted from your net income.
FHSA Withdrawals
Funds from your FHSA can be withdrawn as a single lump sum, or as a series of smaller withdrawals. You can even make withdrawals within 30 days of moving into your new home. Just be sure you understand the difference between qualified and unqualified withdrawals outlined below.
Qualified withdrawals
For withdrawals from an FHSA to be non-taxable, they must meet the following conditions:
- You must be a qualified first-time homebuyer when you withdraw the money.
- You must be buying or building a home in Canada.
- You must have a written agreement to either buy or build a qualifying home before October 1 of the year after you made the withdrawal.
- You must intend to make the home your primary residence within one year of building or buying it.
FHSAs must be closed before the end of the year after you make your first withdrawal. Any funds left in your FHSA at that time must be transferred to an RRSP or RRIF or withdrawn. Transfers to an RRSP or RRIF are non-taxable and any funds withdrawn will be taxed at your marginal tax rate.
Non-qualifying withdrawals
Non-qualifying withdrawals don’t count toward the lifetime or annual contribution limit of your FHSA.
- Includes any money withdrawn for reasons other than buying your first home.
- Will be included in your income and taxed at your marginal rate.
- Will be subject to withholding taxes by your financial institution, similarly to taxable RRSP withdrawals.
Saving for your first home
Besides an FHSA, there are several other ways to help get you on track for your first home.
RRSPs and the First-Time Home Buyers’ Plan
If you already have an RRSP and you are ready to buy a home, you can take advantage of the Home Buyers’ Plan (HBP). With the HBP, you can withdraw up to $60,000 from an RRSP for a down payment on your first home. If you and your partner are planning on buying a home together, you can each withdraw up to $60,000 for a total down payment of $120,000. Funds withdrawn from an RRSP for the purpose of buying a home must be repaid over the next 15 years. At least 1/15 of the borrowed amount must be re-contributed every year, starting in the second year from the year of withdrawal. If the minimum amount is not paid back in a year, the difference is considered as RRSP income and will be taxed at your marginal tax rate. Learn more about how to take advantage of the Home Buyers’ Plan.
Leveraging your TFSA
First-time homebuyers can also use TFSAs to save for a down payment. TFSA withdrawals are non-taxable (in most cases) and can be made at any time. There are no limits on how much you can withdraw, and you’re not required to pay anything back. Moreover, any amount withdrawn will be added back to your contribution room so you can recontribute the full amount anytime starting on January 1 of the next calendar year. Learn more about how to help boost your savings with a TFSA.
Take advantage of the HBP and a TFSA
Some people split their savings between an RRSP and a TFSA. If you’re able, consider using your RRSP and TFSA to save for a down payment. Funds from a TFSA can be used to supplement the $60,000 you’re eligible to withdraw under the HBP. Combining your RRSP and TFSA savings can be a great way to help save up a higher down payment.
Things to think about if you’re still saving up
You may not be ready to lay down roots, but it’s good to be prepared when that time does come. If this sounds like you, consider an RRSP or TFSA to jump start your savings. Both accounts provide different benefits that may be better suited to your needs. Which account you use may be less important than when you start using them. In most cases, the earlier you start to save, the better off you’ll be.
Build your savings with an RRSP
An RRSP is an excellent way to start saving for a down payment. RRSP contributions are tax-deductible and re-investing any tax refund you receive can be one great way to help grow your savings. Funds held within an RRSP can be invested in stocks, bonds, mutual funds and other investment products, depending on your appetite for risk. The HBP allows you to withdraw up to $60,000 for the purpose of buying your first home, but those funds must be paid back over the next 15 years. Any funds not paid back will be taxed as income at your marginal tax rate. Learn more about ways to help save with an RRSP.
Build your savings with a TFSA
TFSAs are all about flexibility. While contributions to your TFSA are not tax-deductible, withdrawals can be made at any time, for any reason, tax-free with some exceptions. Funds withdrawn from a TFSA don’t need to be repaid, and TFSAs can hold a wide range of investment products. Generally, you won’t pay taxes on any investment gains you earn, and you can dip into your savings whenever you need them. Learn more about saving with a TFSA.
Transfer your savings to an FHSA down the road
Funds held within an RRSP or TFSA can be used to fund an FHSA, subject to applicable contribution limits.
For example, money held in an RRSP could eventually be transferred to an FHSA without any tax consequences as long as it’s a direct transfer and then withdrawn tax-free for the purpose of buying a home. All you would need is to fill out Form RC720, transfer from your RRSP to your FHSA and give it to your financial institution. Unlike the HBP, funds transferred from an RRSP to an FHSA won’t need to be paid back later. Any money not used to buy your first home can always be transferred back to your RRSP later. However, any transfers originating from RRSP to FHSA are not tax deductible.
A TFSA can also be used to fund, or supplement, an FHSA. However, you'll have to withdraw the money from your TFSA, then contribute it to your FHSA. Withdrawals from a TFSA are tax-free (with some exceptions) and do not need to be repaid. All cash contributions to an FHSA would be tax-deductible, allowing you to avoid paying additional taxes.
Difference between the FHSA and the First-Time Home Buyers' Plan (HBP)
Both an FHSA and the HBP can be used to buy a first home. However, there are some distinct differences between the two.
|
FHSA |
RRSP HBP |
Withdrawals |
No withdrawal limit. You can withdraw everything including any income earned. However, there is a lifetime contribution limit of $40,000. |
Withdrawal limit of $60,000 under HBP. |
Repayment of withdrawn funds |
Qualified withdrawals are tax-free and do not need to be repaid. |
Withdrawals must be repaid over 15 years, with a minimum repayment amount each year, or they will be taxed as income. |
Holding period for funds |
No minimum holding period before withdrawal. |
Minimum holding period of 90 days before withdrawal. |
How do I open an FHSA account?
FHSA are now offered at many financial institutions, including TD Direct Investing. You have two options to open a self-directed FHSA with TD Direct Investing, each with its own unique set of features and capabilities.
Learn more about investing in an FHSA with TD Direct Investing or TD Easy TradeTM.
FAQs
What happens to an FHSA after 15 years or after purchasing a home?
You are required to close all of your FHSAs on or before December 31 of the year following the year of your first qualifying withdrawal.
The FHSA can remain open for up to 15 years or until the Dec. 31 of the year you turn 71, whichever comes first. At that time, any funds in the FHSA not used to buy a qualifying home must be transferred to an RRSP or RRIF or withdrawn. Any non-qualifying withdrawn from an FHSA will be subject to withholding taxes, which can be claimed on your income tax and benefit return as a credit toward any tax owing for the year of the withdrawal. The Canada Revenue Agency (CRA) will send you a reminder when your FHSA needs to be closed.
What can be invested in an FHSA?
Like RRSPs and TFSAs, investments such as stocks, bonds, Exchange-Traded Funds (ETFs), mutual funds and Guaranteed Investment Certificates (GICs) can be held in an FHSA.
Is an FHSA tax-free?
An FHSA (First Home Savings Account) can offer tax saving opportunities for Canadians saving for their first home. Contributions may be tax-deductible, and qualifying withdrawals to purchase a first home can be made without paying taxes on the qualified investment growth or withdrawals. There could be tax implications if FHSA funds are withdrawn for other purposes. Rules and eligibility requirements may apply. If you’re considering an FHSA, you may want to explore how it could support your home buying journey.
How does FHSA contribution room work?
The First Home Savings Account (FHSA) sets an annual contribution limit. For each calendar year, the maximum you can contribute is $8,000, up to a lifetime limit of $40,000. If you contribute less than your annual limit, the unused room can be carried forward to future years, the maximum carry forward is $8000 total. For example, if you open an FHSA but don’t contribute right away, your unused room starts to build from the year you open your account, not from when you become eligible. Tracking your contributions and available room helps you make the most of your FHSA benefits and and helps avoid overcontribution penalties as you work toward your first home purchase.
Can I combine the HBP and FHSA to help me buy my first home?
Yes. You can use the HBP and FHSA to buy your first home at the same time.
Can my spouse and I both open an FHSA to buy the same home?
Yes. Both you and your spouse or partner can open individual FHSAs and use the money in them to buy a qualifying home.
Difference between TFSA and FHSA?
Both the Tax-Free Savings Account (TFSA) and the First Home Savings Account (FHSA) offer tax saving opportunities to help you reach important savings goals, but they’re built for different purposes.
A TFSA is a flexible savings account where qualified investment growth, interest, or dividends you earn are generally tax-free—even when you withdraw money. You can use a TFSA to save for any goal, whether it’s a big purchase, an emergency fund, or your future retirement. There’s no requirement for how or when you use the funds, making it a versatile option for a variety of needs.
An FHSA, on the other hand, is specifically designed to help eligible Canadians save for their first home. With an FHSA, you can contribute up to a set yearly and lifetime limit, and both your contributions and any investment growth are tax-sheltered. What’s unique is that qualifying withdrawals to buy your first home are tax-free, combining features of both a TFSA and an RRSP but focused solely on homeownership.
In short, a TFSA offers you broad flexibility for your savings, while an FHSA supports you in working toward the milestone of your first home, with targeted benefits for that specific goal. Both accounts can help you feel confident as you plan for your future, and you can even use them together to maximize your saving strategies.
Can I transfer funds from a TFSA to an FHSA?
You cannot transfer funds directly from a TFSA to your FHSA as there is no direct transfer option available for TFSA. However, you can withdraw funds from your TFSA and contribute to FHSA tax-free, and get the tax deduction, provided you have contribution room available in your FHSA.
FHSAs can prove to be an important part of a first-time homebuyers' savings strategy. FHSAs combine some of the benefits of an RRSP and TFSA into a single, flexible account. Using an FHSA in combination with other savings accounts can help first-time homebuyers optimize their savings and reach their financial goals earlier. Besides an FHSA, there are a few of other options available to help you save for your first home. The most important thing is to consider starting investing early, which can potentially help you get your hands on the keys to your first home sooner than you think.
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