By Evelyn Jacks. First appeared in Manitoba Lifestyles 55, March 2026
The First Home Savings Account (FHSA) is quite possibly the most lucrative tax-assisted investment to come along for Canadian residents who have not owned and lived in a principal residence in the current or any of the four preceding calendar years. The tax savings start to occur when the money is contributed to the plan – you’ll get a tax deduction. But in addition, the principal earns tax-free income while in the plan. Then upon withdrawal for a home purchase, the money is received on a tax-free basis. To take advantage of this tax triple-header, read on:
How Much Can Be Contributed?
It is possible to contribute up to $8,000 per year to a FHSA. The maximum lifetime contribution to the account is $40,000. The contribution room is created when you open an FHSA, so that’s an important first step.
This account differs in significant ways from other registered accounts. For example, annual contribution room is earned for a Tax-Free Savings Account (TFSA) simply by being a Canadian resident aged 18 or older. New TFSA contribution room is added automatically to your records with the CRA every January 1.
Contributions allowed to an RRSP are based on the prior year’s earned income and they can be made during the calendar year or within 60 days of the next calendar year. In the case of a FHSA, contributions are only deductible in the year they are made, not in the previous year. So this year’s March 2, 2026 RRSP deadline was irrelevant for FHSA purposes.
It’s important to know that there is no “spousal plan” for a FHSA. One spouse can’t make a contribution to the other spouse’s FHSA and then take the deduction on the contributor’s return. However, an individual may provide funds to their spouse to contribute to a FHSA.
FHSA closing.
The account must be closed when any one of three events arises: if the funds are withdrawn to purchase a home, if the plan has been in existence for 15 years or by the end of the year in which you turn 71.
In short, there is an age limit seniors need to be mindful of to qualify for opening a FHSA.
Use the FHSA contribution room.
It’s important to use your FHSA contribution room. Unused contribution room can be carried forward to the next year, but only up to a maximum of $8,000. Therefore, in any given tax year the most you can deduct is $16,000. A carryforward of this year’s contribution to next year could be important if your income is higher then.
In contrast, unused TFSA room carries forward indefinitely, so if you win a lottery or receive an inheritance or severance package, this is a good place to “top up” for future tax-free earnings. The current cumulative lifetime unused TFSA room is $109,000 per individual.
Overcontributions.
Contributions exceeding the $8,000 annual limit or the $40,000 lifetime limit will be subject to penalties. The penalty tax, like those for overcontributions to RRSPs and TFSAs, is 1% for each month that the overcontribution remains in the plan based on the highest amount of such excess that exists in that month.
New contribution room ($8,000 per year) opens on January 1 of the following year, which could convert an overcontribution to an allowable contribution. Overcontributions cannot be deducted in the year of contribution, but the amounts can be deducted in a following year as new annual contribution room becomes available.
Effect on RRSP Home Buyers’ Plan (HBP).
Under the RRSP HBP, you can withdraw up to $60,000 to purchase or build a home without paying tax on the withdrawal, but the amounts must be repaid over 15 years. Repayments start in the second year following the withdrawal year.
One good thing about the RRSP HBP is that the four-year rule does not need to be met when a new, more accessible home is acquired and the new home buyer is moving due to a disability. This is not the case for the purposes of the FHSA: you can’t contribute if your last home was owned in the current or previous four calendar years.
Can you use both the FHSA and the RRSP HBP to help fund a new home purchase? The short answer is yes. Potentially, should a taxpayer maximize contributions under both plans, a tax-free withdrawal from the FHSA of $40,000 (plus accrued earnings) can be made in addition to a maximum $60,000 from the RRSP HBP. For a couple that has enough money in each plan, that allows for a $200,000 down payment.
Can RRSP funds be used for the FHSA contribution?
Yes, RRSP balances may be rolled over to the FHSA subject to the annual and lifetime limits; however, a rollover of RRSP assets will not result in a tax deduction for the contribution (the deduction was received when the money was contributed to the RRSP). But this may not be a good idea. That’s because both FHSA and RRSP HBP withdrawals may be made in respect of the same home purchase for a better tax-advantaged result at the time of purchase.
Down the line, however, if you don’t purchase a home, FHSA plans may be transferred to an RRSP or RRIF if the funds are not used to purchase a home.
Seniors and the FHSA.
While it’s customary for parents or grandparents to help children or grandchildren buy their first home, it’s important not to rule out the tax advantages of a FHSA for older folks. If you (or your parents and/or grandparents) are coming to home ownership late in life or took a pause from home ownership over the past several years and now wish to save on a tax-advantaged basis to buy a new home or condo in the future, consider opening a FHSA.
Evelyn Jacks is an award-winning business leader, a tax literacy advocate, and best-selling author of 55 books on the subject of tax planning and family wealth management. Connect with the Knowledge Bureau News Network to hear her podcast, Real Tax News You Can Use.
By Evelyn Jacks. First appeared in Manitoba Lifestyles 55, March 2026