FHSA Guide 2025: First Home Savings Account Rules and Tax Benefits

The First Home Savings Account gives you a tax deduction on contributions and tax-free withdrawals when you buy a home. No other registered account in Canada does both. If you’re a first-time home buyer, this should be the first account you open.

How the FHSA Works

The FHSA launched on April 1, 2023. You can contribute up to $8,000 per year with a $40,000 lifetime limit. Contributions are tax-deductible, meaning they reduce your taxable income the same way RRSP contributions do. When you withdraw the money for a qualifying home purchase, you pay zero tax on the withdrawal — growth included.

Compare that to your other options. An RRSP gives you the deduction but taxes withdrawals. A TFSA gives you tax-free withdrawals but no deduction. The FHSA gives you both.

Who Qualifies

You need to meet all of these:

Canadian resident at the time you open the account
Age 18 or older (or the age of majority in your province, whichever is later)
First-time home buyer: neither you nor your spouse or common-law partner owned a home that you lived in during the current calendar year or any of the four preceding calendar years

That last point is the one that trips people up. If your spouse owned a home you lived in three years ago, neither of you qualifies. The four-year lookback applies to both of you.

Contribution Room and Carry Forward

The annual limit is $8,000 and the lifetime cap is $40,000. If you don’t contribute the full $8,000 in a given year, you can carry forward up to $8,000 of unused room to the following year.

This means the maximum you can contribute in a single year is $16,000 — your current year’s $8,000 plus $8,000 carried forward from the previous year. You can’t carry forward more than $8,000 regardless of how many years you’ve missed.

A practical example: you open an FHSA in 2024 and contribute $3,000. In 2025, your available room is $8,000 (current year) plus $5,000 (carried forward from 2024) = $13,000. If you contribute nothing in 2025, you carry forward $8,000 (the maximum) into 2026.

The Tax Benefit in Dollars

At a marginal rate of 30%, an $8,000 FHSA contribution saves you $2,400 in tax. Do this every year for five years and you’ll have $40,000 in the account with $12,000 in cumulative tax savings. That’s before any investment growth.

At a 40% marginal rate, the same $8,000 saves you $3,200 annually — $16,000 over five years.

You can see exactly how contributions at your income level affect your tax bill.

What You Can Hold Inside the Account

An FHSA can hold the same types of investments as an RRSP or TFSA:

GICs and savings deposits
Stocks and ETFs
Bonds
Mutual funds

Most major banks and brokerages offer FHSA accounts. If you’re saving for a home purchase that’s three to five years away, a diversified portfolio of low-cost ETFs or a high-interest savings account are the two most common approaches.

Making a Qualifying Withdrawal

To withdraw from your FHSA tax-free, the property must:

Be located in Canada
Be a home you intend to occupy as your principal residence within one year of purchase

You need to have a written agreement to buy or build the home. The withdrawal itself is straightforward — you request it through your financial institution, and the funds go to you with no tax withheld.

Unlike the Home Buyers’ Plan from your RRSP, there is no repayment requirement for FHSA withdrawals. The money is yours, free and clear.

Combining the FHSA with the Home Buyers’ Plan

This is where things get interesting. You’re allowed to use both the FHSA and the RRSP Home Buyers’ Plan for the same home purchase.

FHSA: withdraw up to $40,000 — no repayment
HBP from RRSP: withdraw up to $60,000 — must repay over 15 years
Combined total: up to $100,000 in tax-advantaged funds for your first home

For a couple where both partners qualify, that number doubles. Two FHSAs ($80,000) plus two HBPs ($120,000) = $200,000 from registered accounts. Even in an expensive housing market, that’s a meaningful down payment.

Run the numbers on your income tax situation to see how FHSA deductions fit with your other credits and deductions.

What Happens If You Don’t Buy a Home

Life changes. Maybe you decide not to buy, or maybe you can’t find the right place. The FHSA has a built-in safety net: you can transfer the balance to your RRSP without using any of your RRSP contribution room.

This is a genuinely good deal. You already claimed the tax deduction when you contributed to the FHSA. Now you’re moving the money to your RRSP — where it continues to grow tax-deferred — without eating into your RRSP room. It’s like getting free RRSP space.

The account has a lifespan, though. Your FHSA must be closed by the earliest of:

15 years after you opened it
The end of the year you turn 71
The end of the year following your first qualifying withdrawal

If you haven’t used the money or transferred it by the closure date, the funds become taxable.

FHSA vs RRSP Home Buyers’ Plan: Which Is Better?

Both help you save for a home purchase using pre-tax dollars. But the FHSA wins on one big point: withdrawals don’t need to be repaid.

With the HBP, you borrow from your own RRSP and must repay the full amount over 15 years. Miss a repayment and the CRA adds that year’s required amount to your taxable income. It’s not a loan from the government — it’s a loan from your future self, and it has consequences if you fall behind.

With the FHSA, you contribute, you claim the deduction, you withdraw for a home purchase, and you’re done. No strings.

That said, there’s no reason to choose one over the other. Use both. Max your FHSA first ($8,000/year is manageable for many savers), build up your RRSP alongside it, and deploy both accounts when you’re ready to buy.

Opening an FHSA: Timing Matters

Even if you can only contribute a small amount right now, open the account. Your carry-forward room only starts accumulating once the account exists. If you wait until 2027 to open an FHSA, you lose the carry-forward room from 2025 and 2026 permanently.

Contributing even $1 in your first year activates the clock. The sooner you open it, the more room you’ll have available down the road.

This article is for informational purposes only and does not constitute tax advice. Calculations based on 2025 CRA-published rates. Disclaimer