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The Tax-Free First Home Savings Account (FHSA)

Save more towards a new home

Feel like buying a home is out of reach? Housing affordability is a big issue for many Canadians and rising interest rates aren’t making it any easier.

Now there’s another option for us to consider as we work with you and your family to develop an overall strategy that includes saving for a new home. In Budget 2022, the Canadian government proposed the introduction of the Tax-Free First Home Savings Account (FHSA).

The details

The FHSA offers the opportunity to save $40,000 on a tax-free basis and is designed to help Canadians save for a down payment on their first home. If you’re 18 and older and qualify as a first-time home buyer, you can open an FHSA account and contribute up to $8,000 a year to a maximum of $40,000.

Contributions are tax-deductible (like an RRSP), and withdrawals to purchase a first home are non-taxable (like a TFSA).


Anyone who is a resident of Canada, at least 18 years old and a first-time home buyer can take advantage of this program. You’re considered a first-time home buyer if you or your spouse or common-law partner haven’t owned a qualifying home that you occupied as a principal place of residence at any time in the calendar year the account is opened or in the preceding four calendar years.

So, if you’ve been out of the housing market for long enough (and have been renting since then, for example), you could be considered a first-time home buyer. 

Who it’s best suited for

Younger first-time home buyers who have a longer timeline before buying can take advantage of potential investment growth.

Gifting money to children

If you’re a parent or grandparent, consider having your child or grandchild open their own FHSA. You can then gift funds to allow them to make annual contributions. While the tax deduction in this case is only available for the child, it’s a great way to transfer your wealth to the next generation and help them invest money towards home ownership.

When it needs to be closed

You’re generally required to close your FHSA within 15 years of opening the account. If you don’t use the money in the account towards purchasing a home, you can direct it towards your retirement by transferring your savings on a tax-free basis to an RRSP or RRIF. This transfer doesn’t require you to have existing RRSP contribution room.

Qualified investments

Like an RRSP and TFSA, you can hold mutual funds, publicly traded securities, government and corporate bonds and GICs.

How it compares to the Home Buyers’ Plan

The Home Buyers’ Plan (HBP) allows you to withdraw up to $35,000 from your RRSP and use those funds to buy or build a home for yourself or a relative with a disability. This money is tax free if it is paid back within 15 years.

Unlike the HBP, the FHSA funds don’t have to be paid back into the plan, and the limit is higher at $40,000.

Note: You can take advantage of both the HBP and FHSA for the same qualifying home purchase, allowing you to withdraw up to $75,000 of capital, plus any investment income and growth in the FHSA.  

FHSA versus HBP: A comparison




How much can I withdraw?

Up to the balance of the account (including investment income and growth)

Up to $35,000

Do I need to pay it back?


Yes, within 15 years

How much can I contribute?

$8,000/year up to a lifetime $40,000 limit

It depends on your RRSP contribution limits

Will unused contributions carry forward to the following year?

Yes—up to $8,000 can be carried forward for use in a future year

Yes, depending on your RRSP contribution limits

Are contributions tax-deductible?



Are withdrawals to buy a qualifying home tax-free?


Yes, if withdrawal is repaid over a 15-year period

How long can I keep the account open?

Until the earliest of the following dates:

  • December 31 of the year following the year a qualifying withdrawal is made
  • 15 years after the account was opened
  • December 31 of the year you turn age 71

Until December 31 of the year you turn age 71


Opening an FHSA is a great way to take advantage of tax-deductible contributions and tax-free compounding growth on income earned and capital gains realized within the account.

Talk to us today about how to structure your financial plan to meet your savings goals.