By Pankaj Babbar, licensed advisor at SAI Insurances · 3 min read
1-minute read
The short answer
- Saving for your first home? The FHSA usually comes first: contributions are tax-deductible and qualifying home withdrawals are tax-free.
- The FHSA lets you put in up to $8,000 a year, to a $40,000 lifetime maximum.
- A TFSA has no deduction, but you can use the money for anything, any time — useful if the home plan might change.
- If you don't buy a home, FHSA savings can generally be moved to your RRSP without using RRSP room.
- Many first-time buyers fill the FHSA first, then use the TFSA for closing costs and extra savings.
Detailed guide · 2 min read
Two good options, one big difference
If you're renting today and hoping to buy, you've probably been told to "use your TFSA" and also to "open an FHSA". Both are fine advice. The difference is that the FHSA was built only for first homes, so it gets an extra tax break — in exchange for rules about how the money is used.
How the FHSA works
- Deduction going in — contributions lower your taxable income, like an RRSP.
- Tax-free growth while the money is invested.
- Tax-free withdrawal when it's used for a qualifying first home.
- Up to $8,000 a year and $40,000 in total.
- For eligible Canadian residents aged 18 to 71 who meet the first-time-buyer rules.
The account can only stay open for a limited number of years, so timing matters.
How the TFSA works for a home
There's no deduction, but there are also no strings. Money comes out tax-free for a down payment, closing costs, furniture, or if you change your mind and don't buy at all. Unused room carries forward, and anything you withdraw is added back to your room the following year.
Comparing them
| FHSA | TFSA | |
|---|---|---|
| Tax deduction | Yes | No |
| Tax-free withdrawal | For a qualifying first home | For anything |
| Limits | $8,000/yr, $40,000 lifetime | Annual CRA amount |
| If you don't buy | Can generally move to your RRSP | Keep it or spend it |
What if the home never happens?
This is the worry that stops people opening an FHSA. In general, the savings can be transferred to your RRSP without needing RRSP room, so the deduction you already claimed isn't wasted — it just becomes retirement savings instead.
A common order of steps
- Open the FHSA early — room only starts building once the account exists.
- Contribute to it first while you're working toward a purchase.
- Use the TFSA for extra savings and the costs around the purchase.
- Look at the RRSP Home Buyers' Plan if you have RRSP savings too.
This article is general information, not financial or tax advice. FHSA and TFSA limits, eligibility and transfer rules are set by the Canada Revenue Agency and can change year to year. Your advisor confirms your eligibility and available room.