First Home Savings Account (FHSA): What is it?

The mechanics:

• $8,000 per year is the annual contribution cap.
• $40,000 is the lifetime ceiling. Once you've contributed $40K total, you're done — even if you've been in the program less than 5 years.
• Unused room carries forward, up to $8,000. If you contribute $3,000 this year, $5,000 of room carries to next year — meaning next year you could contribute up to $13,000 (the $8K standard + $5K carried forward). But the carry-forward can't grow indefinitely; it's capped at $8,000 in any single year.
• Room only starts accruing once you open an account. If you wait until 2028 to open one, you don't get back-room from 2024-2027. That's why opening it early — even with a $0 contribution — is a smart move.

You can open an FHSA if you are:

• A Canadian resident at the time you open the account.
• At least 18 years old. Provincial age of majority applies — 19 in BC, Nova Scotia, NB, Newfoundland, NWT, Nunavut, Yukon; 18 elsewhere.
• A first-time home buyer. Specifically: you and your spouse/common-law partner have not lived in a home that you owned (as principal residence) in the current calendar year or any of the previous four calendar years. This is the same definition the federal Home Buyers' Plan uses.

Note: you can have an FHSA open even if you're not currently sure you'll buy in Canada. The eligibility test is about your past homeownership, not your future intentions.

Note 2: each individual gets their own FHSA. A couple where both partners qualify can each open one — doubling the contribution capacity to $80,000 combined.

Most savings accounts give you ONE tax benefit. The FHSA gives you both.

Going in: Sarah earns $90,000 a year. She contributes $8,000 to her FHSA. That $8,000 comes off her taxable income, so she's taxed on $82,000 instead. At her marginal rate of ~33%, she saves roughly $2,640 in income tax that year.

Growing inside: She invests her FHSA in a low-cost ETF and earns 6% per year. Over five years, her $40,000 of contributions grows to about $50,000. All that growth happens tax-free.

Coming out: She finds her first home and withdraws the full $50,000 toward the down payment. She pays zero tax on the withdrawal.

Total tax savings: roughly $13,200 from the upfront deductions (over five years) + tax-free growth on the gains. Compared to saving the same amount in a regular non-registered account where she'd lose tax on the gains every year.

Four registered accounts/programs available to first-time buyers. Quick comparison:

• FHSA: $8K/yr, $40K lifetime. Tax-deductible going in. Tax-free out (for first home). The clear winner if you qualify.
• TFSA: $7,000/yr (in 2026), lifetime room depends on age. No deduction going in. Tax-free out. Useful if you've maxed your FHSA, or for general savings beyond a home.
• RRSP (Home Buyers' Plan): You can withdraw up to $60,000 from your RRSP toward a first home, tax-free. You have to repay it back to your RRSP over 15 years starting two years after withdrawal. Combine with FHSA for big down payments.
• Regular savings account: No tax advantages. Every dollar of interest is taxable. Worst option if you have FHSA/TFSA room available.

For most first-time buyers, the priority order is: max your FHSA first → then use HBP from RRSP if needed → then TFSA → never the regular account.

The FHSA and the Home Buyers' Plan (HBP) work together. Here's the math for one person:

For a couple where both qualify as first-time buyers: $200,000.

Key differences between the two:

• The FHSA withdrawal does NOT have to be paid back. The HBP withdrawal does — you have 15 years to repay your RRSP, starting in year 2 after withdrawal.
• The HBP requires the RRSP funds to have been in the account for at least 90 days. Plan the deposit timing.
• You can do both in the same year — at closing, your lawyer or builder can receive both amounts toward the down payment.

FHSA holdings are flexible. You can hold:

• Cash (high-interest savings — typical at robo-advisors and online banks)
• GICs (guaranteed income — good if your home purchase is 1-3 years out)
• Mutual funds
• ETFs (low-cost broad market exposure — typical pick for 3+ year horizons)
• Individual stocks and bonds

What you should hold depends on your time horizon:

• Buying within 1-2 years: stay in cash or short GICs. You can't afford to lose 30% to a market downturn the month before closing.
• Buying in 3-5 years: a mix — maybe 60-70% equity ETFs, the rest in fixed income. Tolerate some volatility for growth.
• Buying in 5+ years: mostly equity ETFs. Time on your side, more growth potential.

Whatever you pick, fees matter. A 0.05% ETF compounds dramatically better than a 2% mutual fund over 5 years.

You have up to 15 years from when you open the FHSA to use it for a qualifying home purchase, or until you turn 71 — whichever is sooner.

If you reach that deadline without buying, you have two options:

• Transfer to your RRSP or RRIF tax-free. This transfer does NOT use any of your RRSP contribution room — it's a bonus. You keep the deferral of taxes until retirement.
• Withdraw it as taxable income. The whole amount is added to your income that year, and you'll pay tax on the full balance. This is rarely the right move.

So even if you don't end up buying — say you decide to keep renting, or move abroad — the FHSA money still has a tax-deferred path to retirement via the RRSP rollover. There's almost no downside to opening one.

• Waiting to open it. Room only starts accruing when the account opens. Open it as soon as you qualify, even with a $0 balance. Future-you will thank you for the carried-forward room.
• Picking the wrong investments. A $20,000 balance sitting in a 0.5% savings account loses real value to inflation. Pick investments matching your time horizon.
• Not coordinating with your spouse. If both of you qualify, both should open accounts. $80,000 combined FHSA capacity is materially more than $40,000.
• Over-contributing. Going above the $8,000 annual cap triggers a 1% per-month penalty on the excess until you withdraw it. Keep a running tally.
• Not knowing about HBP stacking. A lot of first-time buyers use the FHSA and forget the RRSP HBP exists. You can use both at the same closing.
• Withdrawing for a non-qualifying purpose. If you withdraw for something other than a qualifying home (or transfer to RRSP), the amount becomes taxable income that year.