FHSA vs TFSA for home buyers: fund the FHSA first

FHSA gives you tax deductions now plus tax-free withdrawals later - TFSA only gives you the withdrawal benefit.

If you're saving for your first home and have room in both accounts, the FHSA beats the TFSA every time. You get the same tax-free withdrawal for your home purchase, plus a tax deduction the TFSA can't match.

Here's the math. You put $8,000 into your FHSA this year. At $70,000 income in Ontario, that's roughly $2,500 back on your tax return - money you can put toward your home or invest elsewhere. Put that same $8,000 into your TFSA and you get no deduction at all.

Both accounts let you withdraw tax-free for your first home. Both let your investments grow without annual taxes. The FHSA just pays you upfront too.

The catch everyone misses

Your FHSA withdrawals don't restore contribution room. Pull out $20,000 for your down payment and that room is gone forever. Your TFSA is different - withdraw $20,000 and you get that room back the following January.

This matters if you're not sure about buying. Maybe you're saving for a home but job security feels shaky. Maybe you're considering different cities with very different housing costs. The TFSA keeps your options open in a way the FHSA doesn't.

But if you're committed to buying within the next few years, the upfront tax deduction is too valuable to skip.

When income changes the answer

The lower your income, the smaller your FHSA deduction. At $40,000 in any province, you're looking at maybe $1,200 back instead of $2,500. Still better than the TFSA's $0, but the gap narrows.

Above $80,000, the FHSA deduction gets more attractive. In Quebec at $90,000, that $8,000 contribution saves you roughly $3,400 in taxes. TaxSplit.ca will show you exactly what the deduction is worth at your income and province.

How much room you actually have

The 2025 limits are $8,000 per year for the FHSA, $40,000 lifetime. The TFSA is $7,000 this year, but you might have unused room from previous years. Check your most recent Notice of Assessment for your actual TFSA room - it's usually higher than you think.

If you have $15,000 to invest and room in both accounts, put $8,000 into the FHSA first for the deduction, then $7,000 into the TFSA. Next year, another $8,000 into the FHSA before touching the TFSA again.

The FHSA wins until you hit that $40,000 lifetime limit. After that, everything goes to the TFSA.