First Home Savings Account

The New First Home Savings Account (FHSA): A Powerful Tool for First-Time Homebuyers

Buying your first home is exciting — but saving for a down payment can feel daunting. To help Canadians reach that goal faster, the government introduced the First Home Savings Account (FHSA) — a new plan that blends the best features of an RRSP and a TFSA.

What Is an FHSA?

The FHSA is a registered account that allows eligible Canadians to save up to $40,000 toward their first home, with some major tax advantages:

• Tax-deductible contributions: Just like an RRSP, contributions reduce your

taxable income.

• Tax-free growth: Any investment earnings inside the account are tax-free.
• Tax-free withdrawals: When you use the funds to buy your first home, both your
• contributions and investment gains come out completely tax-free.

Key Rules and Limits

• Eligibility: You must be a Canadian resident, at least 18, and a first-time homebuyer — meaning you haven’t lived in a home you (or your spouse) owned in the past four years.
• Contribution limits: Up to $8,000 per year, with a $40,000 lifetime maximum. Unused room carries forward (up to $8,000).
• Account lifespan: You can keep an FHSA open for up to 15 years, or until the end of the year you turn 71, whichever comes first.

If you decide not to buy a home, you can transfer the balance to your RRSP or RRIF without affecting your RRSP contribution room -keeping your savings tax-deferred.

FHSA vs. Other Savings Options

Feature                                    FHSA           RRSP (Home Buyers’ Plan)                TFSA

Tax deduction.                                 Yes                                 Yes                                                             No

Tax-free withdrawals         For first home                    Must be repaid                                              Yes

Repayment required                        No                          Yes, over 15 years                                           No

Unlike the RRSP Homebuyers Plan, the FHSA has no repayment plan but still receives the same tax deduction benefit.

Who Benefits Most

The FHSA can be an incredible opportunity for a wide range of Canadians:

• Young professionals and new graduates who plan to buy their first home in the next several years can start building savings early while reducing their taxable income each year.
• Couples saving together can each open an FHSA, doubling their potential combined tax-free savings to $80,000.
• High-income earners benefit from the immediate tax deduction, lowering their taxable income while still keeping flexibility for future home purchases.
• Renters who are unsure of their timeline can still take advantage of the FHSA. If they don’t end up buying, funds can be rolled into an RRSP or RRIF with no tax consequences — so there’s virtually no downside to opening one.
• Parents looking to help their adult children might also consider gifting FHSA contributions as part of a longer-term strategy to support homeownership.

The Bottom Line

The First Home Savings Account is one of the most effective new savings tools available to Canadians. It combines the immediate tax benefit of an RRSP with the flexibility and tax-free growth of a TFSA — all designed to make homeownership more achievable.

If you’re thinking about buying your first home or want to explore how the FHSA fits into your financial plan, let’s connect. Together, we can build a savings strategy that helps you move closer to your first set of house keys — and your long-term financial goals.

Brad Winlaw

Investment Advisor

Green Private Wealth