First Home Savings Account (FHSA)
What it is
A First Home Savings Account blends the best mechanics of the RRSP and the TFSA, scoped to a first-home purchase. Contributions are deductible against income (like an RRSP); growth compounds tax-free (like a TFSA); qualifying withdrawals for a first home are tax-free (unlike an RRSP).
The FHSA is a newer account — introduced April 2023 — and is designed specifically for the first-home transaction, with mechanics that prevent it from being used as a general-purpose retirement or savings vehicle.
Who can open one
Canadian residents aged 18 or older (or the age of majority in their province) up to age 71, with a valid SIN. Two further eligibility tests: the account holder must be a first-time home buyer, meaning they have not lived in a home owned by them or their spouse/common-law partner in the current year or any of the four preceding calendar years.
An individual has a 15-year window from opening to close the account — by December 31 of the year containing the earliest of (a) the 15th anniversary of opening, (b) the year after first qualifying withdrawal, or (c) the year the account holder turns 71.
How contributions work
Annual contribution room is fixed — not a percentage of income like the RRSP, and not accumulating indefinitely like the TFSA. Up to $8,000 of unused annual room can carry forward one year; anything beyond is lost. Lifetime cap is $40,000 in contributions.
Contributions made in the first 60 days of a calendar year cannot be carried back to the prior year's deduction — unlike the RRSP. The deduction applies to the year of contribution.
Tax treatment
Contributions are deductible against taxable income in the year contributed (or carried forward). Growth compounds tax-free. Qualifying withdrawals for a first-home purchase are tax-free — both the original contributions and all accumulated growth.
Non-qualifying withdrawals (i.e., not for a first-home purchase) are fully taxable as RRSP withdrawals would be. Funds can also be transferred to an RRSP or RRIF without using RRSP contribution room — avoiding the tax hit if the home purchase doesn't happen.
How withdrawals work
A qualifying withdrawal requires a written agreement to buy or build a qualifying home before October 1 of the year following the withdrawal, and the account holder must be a first-time home buyer at the time of withdrawal (or become a non-resident and withdraw before that). The home must be intended to be occupied as a principal place of residence within one year of acquisition.
A qualifying withdrawal can be a full emptying of the account or a partial amount. The FHSA can also be combined with an RRSP Home Buyers' Plan withdrawal for the same home purchase.