First Home Savings account (FHSA) 101: The account that does something nice for first-time buyers
The tax deductible, tax free, first home power tool explained.
The FHSA is one of the rare tools that actually helps first time buyers. If buying your first home feels about as realistic as your toddler calmly wearing the boots you picked, the FHSA is one of the only things that truly moves the needle.
Think of it as the government giving you a break because housing has turned into a circus.
The FHSA mixes the best parts of an RRSP and a TFSA into one pink, glittery unicorn of an account. Here is what you need to know.
What an FHSA is - in simple terms
An FHSA was created in 2023 and is a special account that lets you save and invest for your first home with some impressive perks. This is how it works:
You put money in
You get a tax deduction just like an RRSP
Your investments grow tax free like a TFSA
You take it out tax free to buy your first home
So you save money, you pay less tax, your money grows, and then you use it to buy a house without giving the tax man a cut.
This might be the only time in life when the government says
“Go ahead queen. Keep it.”
Small reminder: the FHSA does nothing unless you invest inside it. Parking cash is only step one.
How much you can put in
$8,000 per year, for a total of $40,000.
If you skip a year, unused room carries forward. In other words, the most you can drop in one year is $16,000 if you have that much leftover room.
Yes, you can have a magically productive super saver year.
What happens if you Invest $40,000 in your FHSA over 5 years ?
Assuming an 8% annualized return on investment, the account would reach about $58,000 after 5 years while you are busy doing life.
That $58,000 can turn into about $86,000 after 10 years - a $48,000 tax-free gain for your down payment !
Why it’s so good (like, suspiciously good)
Contributions are tax deductible → Your taxable income goes down →Your tax refund often goes up.
Your investments grow tax free: growth from ETFs, stocks, index funds — stays yours.
Withdrawals for your first home purchase are tax free: it feels illegal but it is not.
Who qualifies
If you have been renting forever: Congratulations — you qualify.
You must also:
Be a Canadian resident
Be 18+
Be a first-time home buyer (no home owned in the current year or past 4 years)
How long you can keep it
The FHSA lasts 15 years, or until Dec 31 of the year you turn 71. After that, you can’t keep it open.
So no, it’s not your forever account — it’s your “let’s try to buy a house before the kids graduate” account.
What you can invest in
Basically the same things as your TFSA (a post on low fee investments is in the works):
ETFs
Stocks
Bonds
Index funds
Just be consistent and avoid the stuff that makes you panic at night.
Transfers from your RRSP
You can transfer RRSP money into your FHSA tax free and it does not count as income (however you will not receive the income tax deduction in this case).
Just do not withdraw from your RRSP first: that creates unnecessary tax. Always transfer, even if this means having to fill out lots of annoying forms.
What if you don’t end up buying a home
A happy plot twist: you can roll your FHSA into your RRSP or RRIF tax free, so nothing is wasted, and nothing lost.
If you withdraw it for anything else, it gets taxed like regular income. In other words, do not use it for your “I am done with these tiles” kitchen reno.
Why you should care
Because the FHSA gives you:
Bigger refunds, allowing for more more to invest
Tax free growth
A real shot at a down payment
Flexibility if life changes
And honestly, with daycare fees, groceries, winter gear, and kids who grow 2 sizes overnight, any tool that lets you keep more of your own money is a win.
Where to open an account
Hot Money Mom loves low fee platforms like Wealthsimple because they save fees that would be charged by a financial advisor.
You can receive $25 when you open your first account with Wealth Simple by using this link or by using code I7YVD2.
More information on the FHSA is on my Resources page. Please refer to the Government of Canada website’s Guide and Estimator for more in-depth information on the FHSA.
