What is the First Home Savings Account?
The First Home Savings Account is a registered plan created to help first-time buyers save for a home. It has been available since 1 April 2023. You open it with a financial institution that offers FHSAs, such as a bank or credit union, and you hold qualified investments inside it, much as you would in an RRSP or a TFSA. The account's appeal is the combination: contributions are generally tax-deductible, growth inside the account is tax-free, and a qualifying withdrawal to buy or build a qualifying first home is tax-free and is never repaid. No other common registered account does all three.
How it compares with an RRSP and a TFSA
| Feature | FHSA | RRSP | TFSA |
|---|---|---|---|
| Contributions | Generally tax-deductible | Tax-deductible | After-tax, not deductible |
| Growth inside | Tax-free | Tax-deferred | Tax-free |
| Withdrawal for a first home | Tax-free, never repaid | Tax-free under the Home Buyers' Plan, but repaid over 15 years | Tax-free, but no deduction was ever given |
| Annual room | $8,000, up to $40,000 lifetime | Based on earned income | Set each year by the government |
| Room before opening | None: room starts in the year you open | Builds with earned income | Builds from age 18 |
| Deadline | Must close by the end of the maximum participation period | Must mature by the end of the year you turn 71 | No deadline |
What can you hold inside an FHSA?
An FHSA can hold qualified investments similar to those allowed in an RRSP: money, guaranteed investment certificates (GICs), government and corporate bonds, mutual funds, and most securities listed on a designated stock exchange. Real property itself is not a qualified investment. If you hold a non-qualified or prohibited investment, penalty taxes can apply, so most people simply choose the same kind of diversified, low-cost holdings they would choose in a TFSA or RRSP and leave exotic assets alone.
Who runs it?
The Canada Revenue Agency sets the rules, tracks your participation room on your notice of assessment and in your CRA account, and receives your FHSA reporting on Schedule 15 and the T4FHSA slip your issuer sends you. Your financial institution holds the account, processes contributions, transfers, and withdrawals, and gives you the forms for a qualifying withdrawal (Form RC725) and for a transfer out (Form RC721). The government does not contribute to your FHSA and does not guarantee your investments: the tax treatment is the benefit, not a payment.
The single most valuable habit
Open your first FHSA as early as you can, even if you contribute nothing at first. Participation room starts only in the year you open your first account. An account opened in one year with no contributions gives you $16,000 of room the next year: $8,000 of new room plus $8,000 of carry-forward. Waiting a year to open permanently loses that year's room, and no later contribution can buy it back.
Sources: Canada Revenue Agency, First Home Savings Account (FHSA) pages: Participating in your FHSAs; Withdrawals and transfers out of your FHSAs (qualified investments note).