Quick note before we start: This article shares general ideas about the First Home Savings Account (FHSA) based on Canada Revenue Agency (CRA) rules. It's not personal financial advice. For official rules and specific eligibility checks, always refer to the CRA's FHSA information page.
Buying your first home in Canada feels impossible right now. But the government has finally introduced a powerful new tool to help: the First Home Savings Account (FHSA).
The FHSA is the biggest game-changer for first-time buyers since the TFSA launched. It combines the two best tax features of your other accounts:
- Tax Deduction on contributions (like an RRSP).
- Tax-Free Withdrawal of all growth and contributions (like a TFSA).
This is often called the “triple-tax advantage”. If you’re eligible, you should open an FHSA immediately.
Part 1: The Essential FHSA Rules
Before you contribute, you need to meet the eligibility requirements set by the CRA and understand the limits.
1. Who is Eligible?
You must be a first-time home buyer who is also:
- A resident of Canada.
- At least 18 years old (or the age of majority in your province/territory).
- Crucially: You (or your spouse/common-law partner) must not have owned and lived in a home as a principal residence in the current calendar year before the account is opened, or at any time in the preceding four calendar years.
2. How Much Can You Contribute?
The FHSA limits are straightforward:
- Annual Limit: $8,000 per year.
- Lifetime Limit: $40,000.
- When room starts: You start to earn contribution room only after opening your first FHSA.
The 15-Year Clock Once you open your FHSA, the maximum participation period is 15 years, or until you turn 71, or until the year following your first qualifying withdrawal, whichever comes first. Any unused funds must then be transferred to an RRSP or RRIF (Tax-free) or withdrawn (Taxable).
Part 2: Understanding Carry-Forward (The Catch-Up Rule)
The FHSA carry-forward rule allows you to make up for missed contributions, but it has a specific cap.
The unused portion of your annual room can be carried forward, up to a maximum of $8,000. This means your total contribution room in any given year can never exceed $16,000 ($8,000 new room + $8,000 carried-forward room).
| Year | Action/Contribution | Annual Limit Gained | Carry-Forward from Previous Year | Total Room Available |
| Year 1 (Account Opened) | Contributed $1,500 | $8,000 | $0 (No carry-forward in the first year) | $8,000 |
| Year 2 | Max Contribution | $8,000 | $6,500 (Unused from Year 1) | $14,500 ($8,000 + $6,500) |
| Year 3 (If you maxed out Year 2) | Contributed $0 | $8,000 | $0 | $8,000 |
Calculation Example (Your Scenario): If you open the account and contribute only $1,500 in Year 1, you have $6,500 of unused room. In Year 2, your total room is $14,500 ($8,000 annual limit + $6,500 carried-forward).
Part 3: FHSA vs. HBP/RRSP/TFSA
| Feature | FHSA | RRSP | TFSA |
| Tax on Contribution | Tax Deductible | Tax Deductible | Not Deductible |
| Tax on Withdrawal (for home) | Tax-Free | Tax-Free Loan (HBP – Must be repaid) | Tax-Free |
| Repayment Required? | No | Yes, over 15 years | N/A (Withdrawals are final) |
| Max Withdrawal | $40,000 + Growth | Up to $60,000 (as of 2024) | Unlimited (already tax-free) |
Combining the FHSA and HBP
You can use both the FHSA (max $40,000 plus growth, non-repayable) and the HBP (max $60,000 loan, repayable) for the same qualifying home purchase, provided you meet the conditions for both withdrawals at the time of each withdrawal. This gives couples access to a significant total amount for a down payment.
What Can You Hold Inside?
The FHSA can hold the same qualified investments as the TFSA and RRSP, including: ETFs, stocks, bonds, GICs, and mutual funds.
Part 4: Action Plan for First-Time Buyers
- Check Eligibility: Confirm you meet the four-year non-ownership/residency rule.
- Open the Account Immediately: Opening the account is the single most important first step to start your contribution period and generate contribution room.
- Prioritize Contributions: If you are saving for a home, prioritize funding your FHSA before your RRSP or TFSA until the $40,000 lifetime limit is reached.
- Claim the Deduction Strategically: You don’t have to claim the deduction in the year you contribute. You can carry the deduction forward indefinitely to a future tax year when you expect to be in a higher tax bracket, maximizing your tax savings.
The Reader Takeaway
The FHSA is a unique, powerful tool—a “super-TFSA” for first-time home buyers. If you are eligible, open one immediately to start your contribution room, maximize your $8,000 annual deduction, and get closer to your first home with the ultimate tax advantage.
Next Step: Learn how to choose the right investments for your FHSA based on your timeline. Read our article: [Internal Link: How to Calculate Your True Investment Risk].
Full Disclaimer
This article is for informational and educational purposes only and does not constitute financial or tax advice. The information is not intended to be a complete description of all eligibility requirements or tax considerations. Please consult with a qualified financial, tax, and legal professional before opening or contributing to an FHSA. For detailed and official information on FHSA rules, please visit the Canada Revenue Agency (CRA) website.
