The First Home Savings Account (FHSA) is a federal registered savings plan that lets eligible first-time home buyers save up to $40,000 toward a home purchase in Canada. Contributions are tax-deductible, investment growth is sheltered from tax, and qualifying withdrawals used to buy a home are completely tax-free.
The federal government introduced the FHSA in 2023, and it remains one of the most significant savings tools for anyone looking to buy a first condo or house in Toronto. The account offers a double benefit: an RRSP-like tax deduction when you contribute, and TFSA-like tax-free withdrawal if used for a home.
Canadians can contribute up to $8,000 annually, with a lifetime limit of $40,000. You can carry forward unused portions of your annual contribution limit in any year up to a maximum of $8,000. However, carry-forward room only starts accumulating after you open an account. FHSA contribution room does not accumulate automatically like a TFSA. This is an important distinction. If you wait three years to open your FHSA, you cannot go back and claim the room from those earlier years.
To open an FHSA, you must be a Canadian resident, at least 18 years old (or the age of majority in your province), and a first-time homebuyer. You must not have lived in a qualifying home as your principal place of residence that you owned or jointly owned in the current calendar year or in the previous four calendar years. This definition also considers homes owned by your spouse or common-law partner.
The account can stay open for a maximum 15 years, until the end of the year you turn 71, or until the end of the year after your first qualifying withdrawal. Unlike the Home Buyers' Plan, qualifying FHSA withdrawals don't need to be repaid. That is a significant advantage over the HBP, which currently has a withdrawal limit of $60,000 but requires repayment to your RRSP over 15 years. You can use both programs for the same home purchase if you are eligible.
The balance in your FHSA not used to purchase a qualifying home could be transferred to an RRSP or RRIF on a non-taxable transfer basis. If instead you withdraw the funds for a non-qualifying purpose, the amount becomes taxable income. Unlike RRSPs, the FHSA contribution deadline is December 31 of each calendar year, with no 60-day grace period into the following year.
For first-time buyers saving toward a Toronto condo, opening an FHSA early is one of the most effective ways to build a down payment while reducing your annual tax bill. How much down payment do I actually need to buy a home in Toronto?
