Can the FHSA Account Help You Save Taxes When Buying Your First Home?

If you're preparing to buy your first home in Canada, you may have heard of the First Home Savings Account (FHSA) — a new financial tool launched by the federal government in 2023 to help first-time homebuyers save more effectively and legally.

More than just a savings account, the FHSA offers a rare double tax advantage: you get a tax deduction when you contribute, and your withdrawals are completely tax-free when used for a qualifying home purchase.

So how exactly does FHSA work? Who qualifies? And how can you take full advantage of its benefits? Let’s break it down.

What Is the FHSA?

The FHSA (First Home Savings Account) is a registered savings account with the Canada Revenue Agency (CRA), designed to help eligible Canadians save for their first home purchase. It combines the best features of two popular tools: RRSP and TFSA.

Here's how it works:

• Contributions to your FHSA are tax-deductible, lowering your taxable income in the year of contribution.

• Withdrawals — including both principal and investment growth — are completely tax-free if used to buy a qualifying first home.

In short:
✅ Tax-deductible contributions
✅ Tax-free withdrawals for home purchase

Who Can Open an FHSA?

To open an FHSA, you must meet all three of these criteria:

1. Be a Canadian resident aged 18 or older (or the legal age in your province)

2. Not have owned a principal residence in the last four calendar years

3. Intend to buy a home in Canada to live in within one year of purchase

Even if you've owned a home in the past, you may still qualify if you haven't lived in one (yours or your spouse's) as a principal residence in the last four years.

Contribution Limits & Tax Benefits

You can contribute up to $8,000 per year, and up to a lifetime limit of $40,000 to your FHSA. Like RRSP contributions, these are tax-deductible.

Example:
If you earn $70,000 and contribute $8,000 to your FHSA, your taxable income drops to $62,000. Depending on your province and tax bracket, this could save you thousands in taxes.

Unlike the RRSP’s Home Buyers’ Plan, FHSA withdrawals for a qualified home don’t need to be repaid — and they remain tax-free.

Will FHSA Really Help You Afford a Home?

Yes — from a financial perspective, FHSA offers multiple benefits:

• Immediate tax reduction when you contribute

• Tax-free investment growth inside the account

• A chance to build a strong down payment if you start early

• You keep 100% of the amount you withdraw to buy a qualifying home

You can even combine FHSA with the RRSP Home Buyers' Plan (HBP) to access over $70,000 tax-free for your down payment.

FHSA Withdrawal Rules

To withdraw from your FHSA tax-free, you must:

• Still be a qualified first-time homebuyer (no principal residence in the past 4 years)

• Have a valid purchase agreement for a home in Canada that you plan to live in

• Intend to move into the home within 1 year

• Withdraw while your FHSA is still active (it expires 15 years after opening or at age 71)

If you don’t use your FHSA within the timeframe, you can transfer it to your RRSP without tax, or withdraw as regular income (taxable).

Tips for Using the FHSA Wisely

• Open your FHSA early to maximize contribution years

• Don’t leave the money idle — you can invest in ETFs, stocks, or GICs within the account

• Track your contributions — CRA monitors your $8,000/year and $40,000 lifetime limits

• Avoid non-qualified withdrawals — or you’ll face full taxation on the amount

Should You Use the FHSA to Buy Your First Home?

Yes — if you qualify and plan to buy within 5–15 years.
The FHSA is one of the most effective savings vehicles for first-time homebuyers, offering:

• Tax deductions now

• Tax-free withdrawals later

Don't miss the opportunity to build your first home fund tax-efficiently — especially if you're just starting your financial journey in Canada.

📩 Not sure whether FHSA or RRSP is better for your home savings strategy?
TikiWealth helps immigrants, young professionals, and families across Canada create customized financial plans — from investment account setup to first-home strategies.

Book your free consultation today to take full advantage of the tax benefits available.