I’m going to walk you through everything you need to know about the brand new registered account that just launched in Canada called the First Home Savings Account or FHSA for short.
This account officially launched on April 1, 2023, however, there weren’t many financial institutions that were actually ready to offer this account on launch day. As of me writing this post, the only institutions that have the FHSA available to open are Questrade, National Bank, and RBC. We’ll likely see more institutions added to this list this spring and throughout the year.
Nevertheless, if you’re a first-time homebuyer and want to understand how this account works so you feel fully informed and prepared before opening an account, this is what you need to know.
Let’s start with talking about who is eligible. You can open up an FHSA if you are a resident of Canada and are the age of majority in your province. So that means you need to be at least 18 if you live in Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island, or 19 if you live in British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, Yukon, Nunavut, Northwest Territories. There’s also an age cap, so you can’t open an FHSA if you are over the age of 71.
Another requirement is that you or your spouse or common-law partner must not have owned a home that you lived in as your principal residence in either the calendar year or the prior four calendar years. In other words, if you’ve been living in your common-law partner’s home that they personally own, even though you don’t own it, it still disqualifies you from opening an FHSA.
Where to Open an FHSA
Just like with a TFSA or RRSP, you can open an FHSA with a bank, credit union, trust company, or insurance company. So this means you could open up an account with a big bank like BMO, a credit union like Coast Capital, a trust company like Canadian Western Trust Company, and an insurance company like Manulife. However, although it’s not specified on the CRA’s website, investment dealers can also offer FHSAs. So that means robo-advisors like ModernAdvisor who use custodian partners CI Investment Services and Credential Qtrade which are registered investment dealers will offer these accounts too. And discount brokerages like Questrade, which is a registered investment dealer, will also offer these accounts. In other words, pretty much all types of financial institutions will be offering these accounts, so you’ve got lots of choices to choose from.
What Can You Put Inside an FHSA
One thing that people got really confused about when the TFSA launched in 2009 was thinking that you could only put cash in your tax-free savings account because it has the words “savings account” in it. But you can also put investments inside a TFSA, and the same thing goes for the first home savings account. It’s not just a savings account. It’s up to you whether you’d like to hold cash, GICs, government or corporate bonds, mutual funds, or securities listed on a designated stock exchange like stocks or exchange-traded funds (ETFs). And if you plan on saving for several years and want to see the money grow inside that account, investing it instead of letting it sit in cash earning low interest may be a good idea.
If you’re not sure what to invest in, I’ve got lots of videos about passive investing in a portfolio of ETFs (which is my preferred strategy) but I also have a course called Wealth Building Blueprint for Canadians all about it too you can check out here.
Ok, now let’s get to the really important part, what are the rules!
Once you open the account, you can contribute up to $8,000 per year for a maximum of $40,000. That may not seem like a lot with how much houses cost these days, but remember, if your plan is to invest that money for several years, the idea is that your nest egg will grow to a much bigger number to help you with your down payment.
And any growth inside the account will not affect your FHSA contribution room. Moreover, you can use your FHSA in conjunction with the RRSP First Time Homebuyers Plan, which allows you to borrow up to $35,000 from your RRSP to buy your first home. So that brings you to $75,000 not including any accumulated growth. And if you’re buying it with a partner who is also eligible for both the FHSA and HBP, that brings you up to $150,000 for a decent down payment. And then of course, you can also use money from your TFSA and unregistered accounts to boost your down payment too.
In terms of how to contribute, you can either contribute new money or you can transfer cash or securities from your existing RRSP on a tax-free basis, as long as the contribution doesn’t exceed your available FHSA contribution room. This could make sense if you want to unlock $75,000 from your RRSP by using both your FHSA and the First Time Homebuyers Plan.
Speaking of transfers, you can also transfer funds from one FHSA account to another FHSA account (because you’re allowed to open up multiple accounts, you’re just restricted by your available contribution room). This would make sense if say you originally opened an account with RBC and then opened one with Wealthsimple and then later decided you wanted to move the funds you have with RBC over to Wealthsimple and just have everything in one place.
You can also transfer funds from your FHSA to your RRSP or RRIF tax-free. This is something you’d likely do if you decide not to buy a home after all but don’t want to withdraw your contributions and be taxed on them. Instead, you can just move them over to your RRSP or RRIF tax-free and the best part is, doing this will not affect your available RRSP contribution room. In other words, by opening up an FHSA and then moving your contributions over to your RRSP because you decided not to buy a home, you basically get an extra $40,000 in RRSP contribution room for free.
One thing I will caution you about because I see this happen when people try to make a transfer between TFSA or RRSP accounts, make sure you work with your financial institution to set up a proper transfer. If you make a withdrawal from your FHSA for example and then make a contribution to your RRSP, it’ll look like an FHSA withdrawal and new RRSP contribution, which means you’ll get taxed on that withdrawal and that RRSP contribution will take up your available RRSP contribution room. So make sure to set a proper plan-to-plan transfer to avoid this costly mistake.
The last thing on contributions, make sure to keep track of them so you don’t over-contribute your $8,000 limit each year. Because if you do, you’ll have to pay a tax of 1% per month on the highest excess FHSA amount in that month. Depending on how much you over-contributed, this tax could stop once you roll over into a new year and get new contribution room, or you can simply withdraw the over-contribution. But this is so simple to avoid, just keep track of your contributions in a spreadsheet.
But what if you open up an FHSA account and then don’t make a contribution until a few years later? What happens to your contribution room? The good news is that you can carry forward room to a future year, with some restrictions. Unlike a TFSA in which you can accumulate contribution room every year if you don’t make a contribution and you can carry forward any unused room indefinitely, it doesn’t work like that with an FHSA unfortunately. You are limited to carrying forward only $8,000 to a subsequent year. So if you opened up an account in 2023 but didn’t make your first contribution until 2025 (so two years later), you would have a total of $16,000 in contribution room. $8,000 for the year you made your first contribution and the carry-forward of $8,000 from the year you opened the account.
One of the big benefits of the FHSA is you get a tax deduction for all of your contributions, just like when you contribute to your RRSP. So effectively, you are getting an extra $40,000 in eligible tax deductions when contributing to an FHSA.
But, unlike RRSPs, one important thing to remember is there is no first 60 days rule (what’s popularly marketed as RRSP season). In case you don’t know, with your RRSP, you can make a contribution to your account in the first 60 days of the new year and choose to either have that contribution count as a tax deduction for the previous tax year or a future one.
For example, if you made an RRSP contribution on January 25, 2023, when you do your taxes for the 2022 tax year, you can choose to have that contribution count as a tax deduction on your 2022 taxes or you can save it for a future year. This rule only applies to RRSPs, this rule does not apply to FHSAs. So if you made an FHSA contribution on January 25, 2023, you can only use that as a tax deduction on your 2023 taxes or a future tax year.
Also important to know, you cannot claim a tax deduction for a contribution you make to your FHSA after you make your first qualifying withdrawal from the account. So let’s say you make a withdrawal because you’re ready to buy a home, if you decide to make a new contribution to your FHSA during this time, you won’t get a tax deduction for that contribution.
Making a Withdrawal
When you’re ready to buy your home, you can make what’s called a qualifying withdrawal from your account, which entails you filling out Form RC725, Request to Make a Qualifying Withdrawal from your FHSA and giving it to your FHSA issuer.
You also still need to meet all the FHSA first-time home buyer eligibility requirements as I shared earlier, as well as have a written agreement to buy or build a qualifying home with the acquisition or construction completion date before October 1 of the year following the date of the withdrawal. The home you buy or build must also be in Canada and it must be your principal residence.
For example, and paraphrasing from the example on the CRA’s website, if you signed a written purchase agreement on May 15, 2025, to buy a qualifying home, and the possession date wasn’t until January 8, 2026, and you filled out the FHSA form on July 4, 2025, to withdraw all your funds from the account to make your down payment, you’d meet the proper withdrawal requirements. But again, make sure you speak with a rep from your financial institution before taking any money out from your FHSA, because if you mess it up, you’ll be taxed on your withdrawal and that can be a good chunk of change.
Closing Your FHSA
And finally, if you have to close your FHSA on December 31 of the year in which you either turn 71, or the 15th anniversary of you opening your first FHSA account, or the year following your first qualifying withdrawal from your FHSA. Pretty straightforward but I think the key thing to remember is you can only have your account open for 15 years, and you have to close down the account the year after you make your first withdrawal.
Got any questions about the FHSA? Let me know in the comments!