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Canada FHSA Guide (First Home Savings Account)

the First Home Savings Account (FHSA) in Canada, a new registered plan introduced in the 2022 Federal Budget (effective April 1, 2023) and available from the major financial institutions since mid-2023. The FHSA combines the best features of the RRSP (the tax-deductible contributions) and the TFSA (the tax-free withdrawals for the qualifying home purchase). The annual contribution limit is $8,000 (the contributions within the annual limit reduce the FHSA room). The lifetime contribution limit is $60,000. The deductible contributions reduce the taxable income (like the RRSP). The qualifying withdrawals for the purchase of the first home in Canada are tax-free (the "tax-free first home savings withdrawal" — the FHSA withdrawal is not included in the income). The 15-year maximum holding period starts from the first FHSA contribution (the account must be closed by the end of the 15th year after the first contribution). The FHSA-to-RRSP transfer allows the taxpayer to transfer the FHSA funds to the RRSP without the tax consequences if the qualifying home purchase is not made. The FHSA eligibility requires the taxpayer to be the Canadian resident aged 18+, with the "first-time home buyer" status (the taxpayer must not have lived in the home owned by the taxpayer or the spouse in the prior 4 years).

FHSA Contribution Rules

• Annual limit: $8,000 per year. The annual limit is not indexed to the inflation (fixed at $8,000). The unused FHSA contribution room can be carried forward to the subsequent years (up to the maximum $8,000 per year), but the total cumulative room cannot exceed $40,000 (5 years x $8,000) plus any unused room from the prior years.
• Lifetime limit: $60,000. The taxpayer cannot contribute more than $60,000 in total to the FHSA regardless of the annual room and the carry-forward. The FHSA limit is separate from the RRSP limit and the TFSA limit.
• Deductible contributions: The FHSA contributions are deductible against the taxpayer's income in the year of the contribution (or the following year, at the taxpayer's choice). The deduction reduces the taxable income up to $8,000 per year plus the unused room.
• Non-deductible contributions: The taxpayer can choose to deduct less than the full contribution (the "undeducted contributions"). The undeducted amount stays in the FHSA and can be deducted in the future. The income earned on the undeducted contributions is still tax-free (the FHSA growth is always tax-free).
• Overcontribution: The FHSA overcontribution is penalized at 1% per month on the excess amount. The overcontribution above the available FHSA room (the lifetime limit of $60,000 or the annual limit of $8,000) is subject to the penalty.
• Contribution room: The FHSA contribution room starts at 18 (the year the taxpayer turns 18). The room accumulates from April 1, 2023 (the effective date of the FHSA). The taxpayer can contribute the full $8,000 in the year of the first eligibility (even if the eligibility starts mid-year).

Qualifying Withdrawal Rules

• Qualifying withdrawal: A tax-free FHSA withdrawal for the purchase of the first home in Canada. The home must be located in Canada and must be occupied by the taxpayer (or the spouse) within 1 year of the purchase. The qualifying withdrawal is tax-free and is not included in the taxpayer's income.
• First-time home buyer: The taxpayer must not have owned a home in the prior 4 calendar years (before the withdrawal). The spouse (if the spouse is the joint owner) must also meet the first-time home buyer test. The taxpayer can have owned a home more than 4 years ago.
• Withdrawal limit: The maximum qualifying withdrawal is the fair market value of the FHSA at the time of the withdrawal. The taxpayer can make multiple qualifying withdrawals (up to the total FHSA balance). The taxpayer can also combine the FHSA withdrawal with the HBP withdrawal (from the RRSP) for the same home purchase.
• No repayment required: Unlike the Home Buyers' Plan (HBP) from the RRSP, the FHSA does NOT require the repayment. The taxpayer keeps the tax-free benefit permanently. This is the key advantage of the FHSA over the HBP.
• Joint purchase: The spouses can both use their own FHSA and HBP withdrawals for the same home purchase (up to $60,000 each from the FHSA plus up to $60,000 each from the HBP, for the total of $240,000 per couple).
• Non-qualifying withdrawal: If the taxpayer uses the FHSA funds for a non-qualifying purpose (not for the first home purchase), the full withdrawal is included in the taxpayer's income (taxed at the marginal rate). The non-qualifying withdrawal is treated as the ordinary income.

Account Closure & Transfers

• 15-year limit: The FHSA must be closed by the end of the 15th year after the first FHSA contribution (or the taxpayer's 71st birthday, whichever is earlier). The taxpayer has three options: (1) make the qualifying withdrawal (buy the home), (2) transfer the FHSA balance to the RRSP or the RRIF (tax-free, no reduction in the RRSP room), or (3) withdraw the balance as the taxable income (the non-qualifying withdrawal).
• FHSA-to-RRSP transfer: The taxpayer can transfer the FHSA funds to the RRSP or the RRIF at any time (without the tax consequences). The transfer does not affect the RRSP contribution room. The transferred funds are treated as the RRSP income when withdrawn.
• Marriage breakdown: The FHSA can be transferred between the spouses without the tax consequences upon the marriage breakdown or the divorce. The transfer does not affect the FHSA room of the receiving spouse.
• Death of the FHSA holder: Upon the death of the FHSA holder, the FHSA is transferred to the surviving spouse (if the spouse is the "successor holder") or the beneficiary (the "successor beneficiary"). The spouse can continue the FHSA as the successor holder (the FHSA continues with the same room). If the beneficiary is not the spouse, the FHSA is transferred to the RRSP or the RRIF without the tax consequences.

FHSA vs RRSP vs TFSA

• FHSA: Tax-deductible contributions (up to $8,000 per year, $60,000 lifetime), tax-free growth, and tax-free withdrawals for the first home purchase. The best choice for the first-time home buyers.
• RRSP: Tax-deductible contributions (up to 18% of the earned income, max $31,560 for 2025), tax-free growth, and taxable withdrawals. The RRSP HBP allows the $60,000 withdrawal for the first home (but requires the 15-year repayment).
• TFSA: Non-deductible contributions (up to $7,000 for 2025), tax-free growth, and tax-free withdrawals (no restrictions). The best all-purpose savings vehicle.

For the RRSP HBP and the first-time home buyer rules, see our RRSP Guide →. For the TFSA contribution room and the investment options, see our TFSA Guide →.