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A First Home Savings Account (FHSA) guide for Canadians

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Home affordability has been a major concern for Canadians since the Bank of Canada embarked on a series of rate hikes beginning in 2022. This year, the federal government is set to launch the FHSA, which is supposed to help people save toward a down payment for their first home.

What does FHSA stand for? The Tax-Free First Home Savings Account (FHSA), which was announced in the 2022 federal budget and will be available in 2023 from financial institutions like banks, credit unions, life insurance, and trust companies — though it’s unclear when, exactly. Banks have recently said they’re not prepared for an April 1 launch.

In Canada, the FHSA lets first-time homebuyers save up to $40,000 tax-free and also provides a tax deduction.

Key takeaways of the FHSA

As with the RRSP and the TFSA, there are some guidelines for using the FHSA in Canada:

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  • You have a yearly contribution limit of $8,000 and a lifetime limit of $40,000. This means you could reach your total contribution limit in five years if you deposited the maximum amount each year.
  • If you overcontribute to your FHSA, you’ll be subject to a 1% tax on the excess money until you either withdraw it or a new year begins. Then the overpayment is applied to the new contribution year.
  • When the FHSA was first proposed, you could not carry forward unused contribution room. Now, however, if you don’t max out your yearly contribution, you can carry it forward to the next year. For example, if you contributed $6,000 in the first year, you can carry the remaining $2,000 over to the next year and contribute $10,000 ($8,000 + the $2,000).
  • You can have more than one FHSA but the total amount you contribute can’t exceed both the yearly and total amounts.
  • You can have an FHSA for a maximum of 15 years, or until you turn 71. After that, the money in your FHSA must be transferred to either an RRSP or RRIF, depending on your age. If you transfer it to an RRSP, it will not take up any contribution room.
  • You can transfer funds tax-free from your existing FHSA to another FHSA in Canada, RRSP, or RRIF.
  • While initial legislation would have prevented Canadians from using both the FHSA and Home Buyers’ Plan for the same home purchase, the government has since revised the rules to allow for this. This means you can combine your HBP withdrawal (which has a limit of $35,000) and your FHSA withdrawal to buy your first home. Keep in mind, however, that with the HBP, the funds need to be repaid within 15 years.
  • Each person in your household can have an FHSA, so if you’re purchasing a home with a partner or spouse, this means that as long as it’s each partner’s first home, you both could tap your respective FHSAs for the purchase. This would give you access to up to $80,000.
  • You won’t pay taxes on interest or capital gains gained on investments in an FHSA, and you get a tax deduction based on your yearly contributions. However, you may get taxed if you withdraw the money from your FHSA for any other reason than buying a home.

Who can open an FHSA in Canada?

Anyone who is a Canadian resident, is more than 18 years old, and is a first-time homebuyer can open an FHSA. A first-time buyer is someone who did not own a home at any time during the year the FHSA was opened or during the four calendar years leading up to the time you open the FHSA.

While there aren’t a lot of details yet around how to open an FHSA, specifically, to go about opening an FHSA (e.g., online versus in person), you will be able to open an FHSA at your financial institution if you are eligible.

As of April 4, 2023, Questrade is the only financial institution in Canada that has its FHSA account available.

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Questrade FHSA Limited Time Offer
Receive up to $50 as a trade commission rebate after you’ve opened and funded a self-directed FHSA. Customers who open a Questwealth Portfolios FHSA will have the first $10,000 they deposit managed free for a year.

How much can you contribute to your FHSA?

You can contribute up to $8,000 annually in an FHSA, up to a maximum of $40,000 over the course of your lifetime. If you don’t contribute the yearly maximum, the remaining allotted amount can be carried over to the following year, similar to how a TFSA works.

When will the FHSA be available?

Legislation regarding the FHSA comes into effect on April 1, 2023. While there is no set date for when the FHSA account will be available, it’s expected to launch sometime in 2023.

What investments are available for the FHSA?

Like an RRSP and a TFSA, an FHSA can hold investments like stocks, bonds, Exchange-Traded Funds (ETFs), Guaranteed Income Certificates (GICs), mutual funds, and cash.

How can I withdraw money from or use my FHSA?

The FHSA is meant to be used to buy your first home. When you want to make a withdrawal, you must submit a request to the financial institution that your FHSA is with, and confirm that you’re eligible. You will need to show a written agreement to buy or build a home before October 1 of the year following the year of the withdrawal. That home must be in Canada, must be your principal residence, and must be occupied within one year after building or buying it.

If the money is going to be used to buy a first home, your financial institution won’t withhold taxes on the withdrawn amount.

How do I choose between an FHSA, TFSA, or RRSP?

While there are several similarities between an RRSP, a TFSA, and an FHSA, there are key differences, too.

Most financial institutions will allow you to open any of these accounts when you turn 18, they can all be used to save for a down payment. and they all offer tax incentives. With each of these accounts, interest and capital gains will generally grow tax-free but are treated differently upon withdrawal. The other similarity between an FHSA, TFSA, and RRSP is they all have maximum yearly contributions and allow account owners to carry forward contribution room year over year.

However, there are some significant differences between each account.

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  • An RRSP is a registered government plan to help Canadians save for their retirement. You can open an RRSP when you turn 18 and contributions create a deduction that can reduce your taxable income.
  • RRSPs must be converted to a Registered Retirement Index Fund (RRIF) the year you turn 71.
  • Any withdrawals from an RRSP or RRIF are taxed at your marginal tax rate. And if you withdraw under the HBP you must pay the funds back.
  • You can carry forward any unused contribution room.


  • The TFSA was also set up to help Canadians save but it isn’t explicitly targeted toward saving for retirement or buying a first home. Instead, it’s a tool to save for short-, medium-, and long-term goals, that may include retirement, a vacation, or buying a home.
  • You don’t pay taxes on any interest earned.
  • A TFSA doesn’t offer any tax deduction but there is no tax penalty for withdrawing money and you don’t have to pay it back.
  • Unused contribution room for TFSAs carries forward.


  • FHSAs offer a tax deduction for contributions.
  • There is no tax penalty for withdrawals if you use it to buy a home.
  • The FHSA must be unwound after 15 years.
  • Unused money can be contributed to your RRSP without using any carry forward room.

When deciding which account will be most helpful when you go to buy your first home, consider your circumstances. If you’re planning on purchasing a home within the next five years, it might be better to use the money in your TFSA or RRSP, as these accounts have been around for longer and your investments have had time to grow, giving you a larger down payment.

If you have a longer timeframe or are only now starting to save for a down payment, then an FHSA might be the better option. You can max out the contributions, let the investment grow, and benefit from the tax deductions to reduce your income.

Frequently Asked Questions

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