FHSA — First Home Savings Account
A First Home Savings Account (FHSA) is a registered Canadian account designed to help eligible first‑time home buyers save for a down payment. It blends two big benefits: RRSP‑style deductions on contributions (which can reduce taxable income), and TFSA‑style tax‑free withdrawals when used for a qualifying first home purchase.
The core idea (in plain English)
You put money in and may get a tax break for contributing. If you later withdraw for a qualifying first home purchase, the withdrawal can be tax‑free — so you may get a deduction going in and no tax coming out (when rules are met).
Eligibility and timelines (high level)
FHSA eligibility can be nuanced (e.g., first‑time home buyer requirements and timing rules). Treat this page as a framework and confirm details with official CRA guidance.
- Being a qualifying first‑time home buyer
- Opening the account before a maximum age threshold
- Using the account within a set time window before it must be closed/converted
How contributions and deductions work
Contributions are generally tax‑deductible, similar to an RRSP contribution. That can reduce the income you pay tax on for the year you claim the deduction.
- You contribute $8,000 to an FHSA.
- If your marginal tax rate is ~30%, that contribution could reduce your taxes by roughly $2,400.
Actual results vary by province, brackets, and credits. Some rules allow carrying forward deductions depending on circumstances.
What tax‑free home withdrawal means
If you buy a qualifying first home and meet the withdrawal conditions, FHSA withdrawals can be tax‑free and don’t require repayment (unlike the RRSP Home Buyers’ Plan, which has repayment rules).
- Over 3 years you contribute $24,000 total.
- Your investments grow to $27,500.
- You withdraw $27,500 for a qualifying purchase.
- If all conditions are met, the withdrawal is generally tax‑free.
What if you don’t buy a home?
If you don’t end up purchasing a qualifying home, the FHSA can often still be useful. Common pathways include transferring to an RRSP/RRIF without immediate tax, or withdrawing as taxable income.
- Transfer to an RRSP/RRIF (often allowed without immediate tax)
- Withdraw as taxable income (tax likely applies)
What you can invest in
- Cash / savings
- GICs
- Bonds
- Stocks
- ETFs
- Mutual funds
Strategy patterns (examples)
Short timeline (0–3 years)
If you expect to buy soon, many people lean toward lower‑volatility choices (cash/GICs) so the down payment amount is more predictable.
Medium timeline (3–8 years)
Some investors use a conservative ETF mix, accepting market risk in exchange for higher expected return.
Common pitfalls
- Missing qualifying conditions can make a withdrawal taxable.
- Over‑contributions can create penalties.
- Investing too aggressively near purchase time can reduce your down payment if markets fall.
If you’re eligible and expect to buy a first home, an FHSA can be one of the most efficient ways to build a down payment — but confirm eligibility and withdrawal conditions before relying on it.
Educational only. Always confirm limits and withdrawal rules with CRA resources or a qualified professional.