FHSA

Definition

The First Home Savings Account (FHSA) is a registered plan introduced in 2023 under ITA s.146.6. Contributions are deductible like an RRSP and qualifying withdrawals for a first home are tax-free like a TFSA, which gives the FHSA a "best of both" profile for eligible first-time buyers. The plan must be closed by December 31 of the year containing the 15th anniversary of opening, the year the holder turns 71, or the year after the first qualifying withdrawal, whichever comes first.

Key rules

• Eligible: Canadian resident, age 18 (or provincial age of majority) to 71, who has not lived in a home they owned in the current year or any of the four preceding calendar years (and whose spouse did not either, if they were a couple).
• Annual contribution limit: $8,000. Lifetime limit: $40,000.
• Unused annual room carries forward up to $8,000, so missing a year does not lose it entirely, but the carry-forward cap is one year of room.
• Contributions are deductible on the T1 in the year made or a later year (unlike RRSP, there is no 60-day grace period).
• Qualifying withdrawals for a first home are tax-free. The buyer must have a written agreement to buy or build a home and intend to occupy it as a principal residence within one year.
• Non-qualifying withdrawals are fully taxable and subject to withholding.
• The FHSA can be combined with the RRSP Home Buyers' Plan. Both can fund the same purchase.
• If a home is not purchased, unused FHSA balances can be transferred tax-free to an RRSP or RRIF with no effect on RRSP room.

Example

A 30-year-old Ontario resident opens an FHSA in January 2026 and contributes $8,000 in each of 2026, 2027, and 2028. She invests in a balanced portfolio, and by mid-2029 the account is worth $28,000. She closes on a condo on September 15, 2029.

Total contributions:            $24,000
Total deductions claimed:       $24,000 (at 29.65% ON combined marginal)
Approximate tax refunded:       $7,116
Qualifying withdrawal in 2029:  $28,000 (tax-free)
RRSP HBP withdrawal same year:  $35,000 (repaid over 15 years starting year 2)
Combined down payment:          $63,000

Common mistakes

• Opening the account but never contributing. The FHSA only generates room once it is opened, so waiting to open it wastes years of $8,000 capacity.
• Contributing above $8,000 in a single year. Only $8,000 plus one year of carry-forward is permitted. Excess triggers a 1% per-month penalty tax.
• Missing the "never owned" test. Living in a home owned by a spouse during the look-back period disqualifies the taxpayer.
• Claiming a qualifying withdrawal without a written purchase agreement. The documentation requirement is strict.
• Forgetting to close the FHSA within 15 years of opening. Balances remaining are forced out as taxable income.

Related concepts

The FHSA sits alongside the RRSP and TFSA as the third leg of personal registered-plan planning. For qualifying first-time buyers it is almost always the first plan to fund, because it combines a deduction at contribution with a tax-free qualifying withdrawal.