Introduced in 2023, the First Home Savings Account combines the contribution-deduction benefit of an RRSP with the tax-free withdrawal of a TFSA. For most prospective first-time buyers, it's the single most powerful savings tool available.
How it works in practice
Up to $8,000 in annual contributions, with a lifetime cap of $40,000. Contributions are tax-deductible (like an RRSP). Investment growth is sheltered. Qualifying withdrawals to buy a first home are tax-free (like a TFSA). Unused contribution room rolls forward up to $8,000.
Stacking with the RRSP Home Buyers' Plan
You can use both. A couple buying together with maxed FHSAs and full HBP withdrawals can put $200,000 toward a down payment using these two programs alone—pre-tax savings recovered as tax-free purchase funds.
Common mistakes
- Opening it too late. The 15-year clock starts when you open the account, not when you contribute. Open one as soon as you might want a home in the next 15 years.
- Holding cash inside. Most banks default FHSAs to a savings account paying nothing. Move the funds to GICs or low-cost ETFs depending on your timeline.
- Not coordinating with HBP. If you withdraw FHSA first, RRSP HBP rules tighten in some scenarios. Sequencing matters.
If you're saving for a first home and don't yet have an FHSA open, this is the highest-leverage thing you can do this week.
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