(Introduced 2023)
The First Home Savings Account (FHSA) is a tax-advantaged registered account created by the federal government in 2023 to help first-time homebuyers save more efficiently for a down payment. It replaces many features that formerly existed under the old RHOSP program and significantly improves on them.
The FHSA allows you to deduct contributions from your income (like an RRSP) and withdraw the money tax-free when buying a first home (like a TFSA).
This “double tax advantage” makes it one of the most generous financial tools available in Canada today.
Key Features of the FHSA
1. Tax-Deductible Contributions
Contributions to an FHSA reduce your taxable income, exactly like RRSP contributions.
How it works
- Contribute up to $8,000 per year
- Lifetime limit: $40,000
- You may carry forward unused contribution room (up to $8,000/year)
- You do not need to claim the deduction in the year you contribute —
you can defer it to a higher-income year to maximize tax savings
Example
If you earn $90,000 and contribute $8,000:
- Your taxable income becomes $82,000
- You receive a tax refund based on your marginal tax rate
- This refund can be reinvested toward your down payment
This makes the FHSA a more powerful tax-saving account than the TFSA.
2. Tax-Free Investment Growth
All investment income, interest, dividends, capital gains, grows tax-free inside the FHSA.
You can hold:
- GICs
- Stocks
- Bonds
- Mutual funds
- ETFs
- Cash
(Investment rules are the same as the TFSA and RRSP.)
3. Tax-Free Withdrawals for a First Home
Withdrawals for the purchase of a qualifying first home are entirely tax-free, including:
- your contributions
- government-deducted tax savings
- all investment growth
This is identical to the TFSA but with the added benefit of tax-deductible contributions.
To qualify for a tax-free withdrawal:
- You must be a first-time homebuyer
(broadly meaning you did not own a home in the past 4–5 years) - The home must be in Canada
- You must have a written purchase agreement
- The home must be your principal residence
You have until October 1 of the year after your withdrawal to actually buy or build the home.
4. Combines the Best Features of RRSP + TFSA
This is where the FHSA stands apart.
RRSP benefit:
✔ Contributions are tax-deductible
✔ Lowers taxable income
TFSA benefit:
✔ Withdrawals are tax-free for the qualifying home purchase
FHSA gives you BOTH.
No other registered account offers this combination.
5. Can Be Used Together With the Home Buyers’ Plan (HBP)
The FHSA does not replace the RRSP Home Buyers’ Plan, you can combine them.
Combined effect
- FHSA tax-free withdrawal up to $40,000 + investment growth
- HBP RRSP withdrawal up to $60,000 (2024 increase)
Total potential down payment advantage:
$100,000+ tax-advantaged funds (plus FHSA growth)
6. What If You Don’t Buy a Home?
The FHSA remains flexible:
Option 1 — Transfer to RRSP
You can transfer the full FHSA balance (contributions + growth) to your RRSP or RRIF tax-free, without requiring RRSP room.
This is a huge advantage, it essentially creates extra RRSP room.
Option 2 — Withdraw funds taxable
You may withdraw, but it will be taxable just like RRSP withdrawals.
7. Eligibility Rules
To open an FHSA, you must:
- Be 18 or older (or provincial age of majority)
- Be a Canadian resident
- Be a first-time homebuyer, meaning:
- You did not live in a home you owned in the current year or previous 4 calendar years
(If you lived in a partner’s home that they owned, you may also be ineligible.)
8. How Long the Account Can Stay Open
An FHSA can remain open until the earliest of:
- 15 years after opening
- The end of the year you turn 71
- The year after you make your first qualifying withdrawal
After that, funds must be transferred to an RRSP/RRIF or withdrawn.
Why the FHSA Is Considered the Modern, More Flexible RHOSP
The FHSA improves on the old RHOSP in several major ways:
| Feature | RHOSP (1974–1985) | FHSA (2023–present) |
| Tax-deductible contributions | Yes | Yes |
| Tax-free withdrawals | Yes | Yes |
| Tax-free investment growth | Yes | Yes |
| Annual limit | Lower | $8,000/year |
| Lifetime limit | $10,000 | $40,000 |
| Investment flexibility | Limited | Full RRSP/TFSA-style investing |
| Ability to transfer if unused | None | Transfer to RRSP/RRIF (no penalty) |
| Still available? | No | Yes |
Result:
The FHSA offers greater limits, more flexibility, unlimited investment choice, RRSP rollover options, and modern tax treatment.
It is widely considered the most generous home-buying incentive in Canadian history.
A powerful, modern savings tool combining the best features of an RRSP and a TFSA.
Brian Madigan LL.B., Broker