What is an FHSA? The First Home Savings Account, explained

The First Home Savings Account, or FHSA, is a registered account the federal government introduced in April 2023 to help Canadians save for their first home. It is the only account in Canada that combines the two biggest tax breaks in personal finance: your contributions reduce your taxable income, the way RRSP contributions do, and qualifying withdrawals come out completely tax-free, the way TFSA withdrawals do.

In French it's called the compte d'épargne libre d'impôt pour l'achat d'une première propriété, or CELIAPP, which is why you'll sometimes see that acronym on bank websites.

How the FHSA works

Think of the FHSA as a container rather than an investment. You open it at a bank, credit union or brokerage, put money in, and then choose what to hold inside it: a high-interest savings balance, GICs, ETFs, mutual funds or individual stocks. The container is what gives you the tax treatment. What you hold inside it decides how much the balance grows.

There are three moments where the tax rules matter:

1. Going in. Contributions are deductible. If you earn $75,000 and contribute $8,000, you can report taxable income as if you'd earned $67,000. You don't have to claim the deduction in the same year, either. More on that in our tax deduction guide.
2. While it grows. Interest, dividends and capital gains earned inside the FHSA aren't taxed year to year.
3. Coming out. A qualifying withdrawal for your first home is tax-free. Any other withdrawal is added to your income and taxed.

Who can open an FHSA

You have to meet every one of these conditions on the day you open your first FHSA:

Note that eligibility is checked again when you withdraw. Opening an account doesn't lock in tax-free status if your circumstances change.

How much you can put in

You get $8,000 of contribution room in the year you open your first FHSA and another $8,000 every year after that, up to $40,000 in total. Room you don't use carries forward to the next year, but only up to $8,000. That cap is the most misunderstood rule in the program, so we've given it a full guide of its own.

Two practical consequences follow from these rules:

• Room doesn't exist before you open an account. Unlike the TFSA, you don't build room just by being an adult in Canada. The clock starts when you open your first FHSA.
• The fastest you can reach $40,000 is five years of maximum contributions, or four if you skip one year and then catch up with $16,000.

What you can hold inside it

The FHSA can hold the same qualified investments as a TFSA or RRSP. What makes sense depends mostly on when you plan to buy:

• Buying within two years: high-interest savings or short-term GICs. A market drop right before closing can do real damage to a down payment.
• Buying in three to five years: a mix, perhaps a conservative balanced ETF, shifting toward cash as the date approaches.
• Five years or more, or unsure you'll buy: a growth-oriented portfolio is more defensible, especially since unused money can roll into an RRSP.

What if you never buy a home?

This is what makes the FHSA low-risk to open. If you decide not to buy, you can transfer the balance directly to your RRSP or RRIF. The transfer doesn't count against your RRSP contribution room, so in effect you end up with extra retirement savings you've already received a deduction for. The money is then taxed like any other RRSP money when you eventually withdraw it.

The account has to be closed by December 31 of the earliest of three dates: the 15th anniversary of opening your first FHSA, the year you turn 71, or the year after your first qualifying withdrawal. Anything not withdrawn or transferred by then becomes taxable income.

Is it worth opening?

For almost anyone who meets the eligibility rules and thinks they might buy within 15 years, yes. The worst realistic outcome is that it becomes a bonus RRSP. The best outcome is up to $40,000 of tax-deductible contributions, plus growth, used toward a home without paying a cent of tax.

The cases where it matters less: if you already have a large down payment saved in a TFSA and are buying within months, the benefit is mostly the deduction on whatever you can still contribute before you buy. Even then, opening the account and moving in up to $8,000 before closing is usually worth doing.

Frequently asked questions