FHSA First Home Savings Account: who qualifies and how it works

The First Home Savings Account lets you deduct contributions like an RRSP and withdraw tax-free like a TFSA - but only if you're buying your first home. It's the best registered account Canada offers, if you qualify.

You can contribute $8,000 per year, up to $40,000 total. Every dollar you put in reduces your taxable income. At $75,000 in Ontario, that $8,000 contribution saves you roughly $2,500 in taxes. When you withdraw for a home purchase, you pay no tax on the money or any growth.

Who qualifies for an FHSA

You need to be 18 or older, a Canadian resident, and a first-time home buyer. The CRA defines first-time buyer as someone who didn't own a home in the current year or the four previous years. So if you sold a place in 2020, you could open an FHSA in 2025.

Married couples each qualify separately. If your spouse owns a home but you don't, you can still open an FHSA. If you both qualify, you can each contribute $8,000 per year to your own accounts.

You have 15 years from when you open the account to make a qualifying withdrawal. Miss that deadline and you have to transfer the money to your RRSP or RRIF, or withdraw it and pay regular income tax.

The catch nobody mentions

You can't contribute to an FHSA after you buy your first home. The account has to close by the end of the following year. If you contribute $20,000 and buy a house two years later, that's it - you can't use the remaining $20,000 of room later.

This makes the FHSA different from TFSA contribution room, which comes back the year after you withdraw. With the FHSA, unused room disappears once you buy.

How it compares to other accounts

The FHSA beats both RRSP and TFSA for first-home savings. The Home Buyers' Plan lets you borrow from your RRSP tax-free, but you have to pay it back over 15 years. The FHSA withdrawal is permanent - no payback required.

For the same $8,000 contribution, the FHSA gives you both the upfront tax deduction and the tax-free growth. A TFSA gives you tax-free growth but no deduction. An RRSP gives you the deduction but taxes the withdrawal.

The 2025 limits make this clear: FHSA at $8,000 per year, TFSA at $7,000, RRSP at $32,490 or 18% of earned income. The FHSA limit is modest but the tax treatment is unmatched.

If you're planning to buy your first home within 15 years, max out the FHSA before contributing to anything else. At $75,000 income in Ontario, TaxSplit.ca shows the exact tax refund you'd get from that $8,000 contribution.