FHSA vs RRSP vs TFSA: Which is Best for First-Time Home Buyers?
If you're a first-time home buyer in Canada, you've probably heard about three powerful savings tools: the First Home Savings Account (FHSA), the Registered Retirement Savings Plan (RRSP) with the Home Buyers' Plan (HBP), and the Tax-Free Savings Account (TFSA). But which one should you use to save for your down payment?
The short answer: It depends on your situation. Each account has unique benefits and limitations that make it better suited for different scenarios.
In this comprehensive guide, we'll break down everything you need to know about these three accounts, compare them side-by-side, and help you develop the optimal savings strategy for your first home purchase.
Table of Contents
- Quick Comparison Table
- Understanding Each Account
- Tax Benefits Explained
- Contribution Limits and Rules
- Withdrawal Rules for Home Purchases
- Which Account is Best for You?
- Optimal Savings Strategies
- Common Mistakes to Avoid
- Real-World Examples
- Frequently Asked Questions
Quick Comparison Table
Here's a high-level comparison to get you started:
| Feature | FHSA | RRSP (HBP) | TFSA |
|---|---|---|---|
| Tax Deduction on Contributions | ✅ Yes | ✅ Yes | ❌ No |
| Tax-Free Withdrawals for Home | ✅ Yes | ✅ Yes (but must repay) | ✅ Yes |
| Tax-Free Growth | ✅ Yes | ✅ Yes (while in RRSP) | ✅ Yes |
| Annual Contribution Limit | $8,000 | 18% of income (max $31,560 in 2024) | $7,000 (2025) |
| Lifetime Limit for Home Purchase | $40,000 | $60,000 | No specific limit |
| Repayment Required | ❌ No | ✅ Yes (15 years) | ❌ No |
| Age Limit | 18-71 | No upper limit | 18+ |
| First-Time Buyer Requirement | ✅ Yes | ✅ Yes | ❌ No |
| Best For | First-time buyers with 5+ years | Higher earners, longer timeline | Flexibility, any goal |
Understanding Each Account
The First Home Savings Account (FHSA)
The FHSA is Canada's newest registered account, introduced in 2023 specifically to help first-time home buyers save for their down payment. It's often called the "best of both worlds" because it combines the tax benefits of an RRSP with the withdrawal flexibility of a TFSA.
Key Features:
- Tax-deductible contributions (like an RRSP)
- Tax-free withdrawals for your first home (like a TFSA)
- No repayment required (unlike the Home Buyers' Plan)
- 15-year maximum participation period
Who Can Open an FHSA:
- Canadian residents aged 18-71
- First-time home buyers (haven't owned a home in the current year or previous 4 years)
- Your spouse's home ownership doesn't affect your eligibility
Contribution Limits:
- Annual limit: $8,000 per year
- Lifetime limit: $40,000 total
- Unused annual contribution room carries forward (but you can still only contribute $8,000 per year maximum)
Example:
Sarah opens an FHSA in 2024 but only contributes $5,000. In 2025, she has $11,000 in contribution room ($8,000 new + $3,000 carried forward), but she can still only contribute a maximum of $8,000 in 2025.
The Registered Retirement Savings Plan (RRSP) and Home Buyers' Plan (HBP)
The RRSP is primarily designed for retirement savings, but the Home Buyers' Plan (HBP) allows first-time home buyers to borrow from their RRSP tax-free to purchase a home.
Key Features:
- Tax-deductible contributions reduce your taxable income
- Tax-deferred growth (no tax on investment gains while in the account)
- Withdraw up to $60,000 tax-free under the HBP
- Must repay the withdrawn amount over 15 years
Who Can Use the HBP:
- Canadian residents
- First-time home buyers (haven't owned a home in the current year or previous 4 years)
- Must have a written agreement to buy or build a qualifying home
- The home must be your principal residence
Contribution Limits:
- Annual limit: 18% of previous year's earned income (maximum $31,560 for 2024)
- Lifetime limit: No lifetime limit for RRSP contributions
- HBP withdrawal limit: $60,000 maximum
Repayment Requirements:
- You have 15 years to repay the amount withdrawn
- Repayments start in the second year after withdrawal (or fifth year for withdrawals made 2022-2025)
- Minimum annual repayment: Total withdrawal ÷ 15
- If you don't repay the minimum amount, it's added to your taxable income for that year
Example:
Michael withdraws $30,000 from his RRSP under the HBP in 2024. Starting in 2029 (due to temporary relief), he must repay at least $2,000 per year ($30,000 ÷ 15) for 15 years. If he only repays $1,000 in 2029, the $1,000 shortfall is added to his taxable income.
The Tax-Free Savings Account (TFSA)
The TFSA is the most flexible registered account in Canada. While it's not specifically designed for home buying, it's an excellent option for saving toward any goal, including a down payment.
Key Features:
- No tax deduction on contributions
- Tax-free growth (no tax on investment gains)
- Tax-free withdrawals at any time, for any reason
- No repayment required
- Contribution room restored the following year after withdrawal
Who Can Open a TFSA:
- Canadian residents aged 18 or older
- Valid Social Insurance Number (SIN)
- No first-time buyer requirement
Contribution Limits:
- Annual limit: $7,000 (2025)
- Cumulative limit: $102,000 (2009-2025 for someone who was 18+ in 2009)
- Unused contribution room carries forward indefinitely
- Withdrawals are added back to contribution room the following year
Example:
Emma has $20,000 in TFSA contribution room. She contributes $15,000 and later withdraws $10,000 for her down payment. Her remaining 2025 contribution room is $5,000. In 2026, she'll have $7,000 (new limit) + $10,000 (2025 withdrawal) = $17,000 in contribution room.
Tax Benefits Explained
Understanding the tax implications of each account is crucial for maximizing your savings.
FHSA: Double Tax Benefit
The FHSA offers the most powerful tax benefits for first-time home buyers:
1. Tax Deduction on Contributions
- Contributions reduce your taxable income
- You get an immediate tax refund based on your marginal tax rate
- Can defer the deduction to a future year if beneficial
2. Tax-Free Withdrawals
- Qualifying withdrawals for your first home are completely tax-free
- No repayment required
- Investment growth is never taxed
Example:
Jordan earns $80,000 and is in the 30% tax bracket. He contributes $8,000 to his FHSA:
- Tax savings: $8,000 × 30% = $2,400 refund
- After 5 years at 5% return: $8,000 grows to ~$10,210
- Withdrawal: $10,210 tax-free (no tax on the $2,210 growth)
- Total benefit: $2,400 (tax refund) + $2,210 (tax-free growth) = $4,610
RRSP (HBP): Tax Deduction Now, Repayment Later
The RRSP with HBP offers tax benefits, but with strings attached:
1. Tax Deduction on Contributions
- Same as FHSA: contributions reduce taxable income
- Immediate tax refund based on marginal tax rate
2. Tax-Free Withdrawal (Temporary)
- HBP withdrawals are tax-free initially
- But you must repay the amount over 15 years
- If you don't repay, it becomes taxable income
3. Tax-Deferred Growth
- Investment growth is tax-free while in the RRSP
- But eventual RRSP withdrawals (in retirement) are taxable
Example:
Alex earns $90,000 and is in the 35% tax bracket. She contributes $30,000 to her RRSP over 3 years:
- Tax savings: $30,000 × 35% = $10,500 in refunds
- HBP withdrawal: $30,000 tax-free for down payment
- Repayment obligation: $2,000/year for 15 years
- If not repaid: $2,000 added to taxable income = $700 tax bill (at 35%)
TFSA: Tax-Free Growth, No Deduction
The TFSA offers simplicity and flexibility:
1. No Tax Deduction
- Contributions are made with after-tax dollars
- No immediate tax benefit
2. Tax-Free Growth
- All investment gains are tax-free
- No tax on dividends, interest, or capital gains
3. Tax-Free Withdrawals
- Withdraw anytime, for any reason, tax-free
- No repayment required
- Contribution room restored next year
Example:
Taylor earns $70,000 and contributes $20,000 to a TFSA over 3 years:
- Tax savings: $0 (no deduction)
- After 3 years at 5% return: $20,000 grows to ~$21,550
- Withdrawal: $21,550 tax-free
- Total benefit: $1,550 (tax-free growth only)
Contribution Limits and Rules
FHSA Contribution Rules
Annual Limit: $8,000 per year
Lifetime Limit: $40,000 total
Carry-Forward Rules:
- Unused annual contribution room carries forward
- But you can still only contribute $8,000 maximum in any single year
- Carry-forward starts the year you open your first FHSA
Example:
- Year 1: Open FHSA, contribute $0 → Carry-forward: $8,000
- Year 2: Contribute $5,000 → Carry-forward: $11,000 ($8,000 + $3,000)
- Year 3: Can contribute $8,000 (not $11,000) → Carry-forward: $3,000
Maximum Participation Period:
Your FHSA must be closed by December 31 of the year in which the earliest of these events occurs:
1. 15th anniversary of opening your first FHSA
2. You turn 71 years old
3. The year following your first qualifying withdrawal
RRSP Contribution Rules
Annual Limit: 18% of previous year's earned income (maximum $31,560 for 2024, $32,490 for 2025)
Deduction Limit Calculation:
RRSP Deduction Limit =
18% of previous year's earned income (up to annual maximum)
+ Unused RRSP deduction room from previous years
- Previous year's Pension Adjustment (if you have an employer pension)
Carry-Forward Rules:
- Unused contribution room carries forward indefinitely
- No annual maximum on contributions (only on deductions)
- Can contribute until December 31 of the year you turn 71
Over-Contribution Buffer:
- You can over-contribute by up to $2,000 without penalty
- Amounts over $2,000 are subject to 1% per month penalty tax
Example:
Priya earned $100,000 in 2024:
- 2025 RRSP limit: $100,000 × 18% = $18,000
- Plus unused room from 2024: $5,000
- Total 2025 deduction limit: $23,000
TFSA Contribution Rules
Annual Limit: $7,000 (2025)
Historical Limits:
| Year | Annual Limit |
|------|--------------|
| 2009-2012 | $5,000 |
| 2013-2014 | $5,500 |
| 2015 | $10,000 |
| 2016-2018 | $5,500 |
| 2019-2022 | $6,000 |
| 2023 | $6,500 |
| 2024 | $7,000 |
| 2025 | $7,000 |
Cumulative Limit: $102,000 (2009-2025 for someone who was 18+ in 2009)
Carry-Forward Rules:
- Unused contribution room carries forward indefinitely
- Withdrawals are added back to contribution room the following year
- No annual maximum on contributions (as long as you have room)
Over-Contribution Penalty:
- 1% per month on excess contributions
- No $2,000 buffer (unlike RRSP)
Example:
Marcus turned 18 in 2015:
- Cumulative room (2015-2025): $10,000 + $5,500 + $5,500 + $5,500 + $6,000 + $6,000 + $6,000 + $6,000 + $6,500 + $7,000 + $7,000 = $71,500
- Contributed to date: $30,000
- Available room: $41,500
Withdrawal Rules for Home Purchases
Understanding the withdrawal rules is critical when planning your down payment savings strategy.
FHSA Qualifying Withdrawals
To make a tax-free qualifying withdrawal from your FHSA, you must meet ALL of these conditions:
1. First-Time Home Buyer Status
- You haven't owned a home in the current year (before withdrawal) or previous 4 years
- Exception: 30 days immediately before the withdrawal don't count
- Your spouse's home ownership doesn't affect your eligibility
2. Written Agreement
- You must have a written agreement to buy or build a qualifying home
- The home must be located in Canada
- Completion date must be before October 1 of the year following the withdrawal
3. Principal Residence
- You must intend to occupy the home as your principal residence within one year of purchase
4. Form RC725
- You must complete Form RC725 and give it to your FHSA issuer
- The issuer will not withhold tax on qualifying withdrawals
No Minimum Holding Period:
- You can withdraw contributions immediately (no 90-day rule like HBP)
- No repayment required
Closing Your FHSA:
- You must close your FHSA by December 31 of the year following your first qualifying withdrawal
- Any remaining funds can be transferred tax-free to your RRSP or RRIF
Example:
Olivia opens an FHSA in January 2024 and contributes $8,000. In March 2024, she finds her dream home and makes an offer. She can withdraw the full $8,000 immediately for her down payment (no waiting period). She must close her FHSA by December 31, 2025.
RRSP Home Buyers' Plan (HBP) Withdrawals
To withdraw from your RRSP under the HBP, you must meet these conditions:
1. First-Time Home Buyer Status
- You haven't owned a home in the current year or previous 4 years
- Exception: If you're recently separated, you may still qualify even if you owned a home with your ex-spouse
2. Written Agreement
- You must have a written agreement to buy or build a qualifying home
- The home must be located in Canada
3. Principal Residence
- You must intend to occupy the home as your principal residence
4. 90-Day Rule
- Contributions made in the 90 days before withdrawal may not be tax-deductible
- This prevents "contribution-withdrawal" schemes
5. Form T1036
- You must complete Form T1036 and give it to your RRSP issuer
Withdrawal Limits:
- Maximum $60,000 per person
- Couples can each withdraw $60,000 (total $120,000)
- Multiple withdrawals allowed within the same calendar year
Repayment Requirements:
- 15-year repayment period
- Starts in the second year after withdrawal (or fifth year for 2022-2025 withdrawals)
- Minimum annual repayment: Total withdrawal ÷ 15
- Missed repayments are added to taxable income
Example:
David withdraws $50,000 from his RRSP in 2024 under the HBP. Due to temporary relief, his first repayment is due in 2029. He must repay at least $3,333 per year ($50,000 ÷ 15). If he repays $5,000 in 2029, his remaining balance is $45,000 and his 2030 minimum repayment is still $3,333.
TFSA Withdrawals
TFSA withdrawals are the simplest:
No Conditions:
- Withdraw anytime, for any reason
- No forms required
- No tax withheld
- No repayment required
Contribution Room Restoration:
- Withdrawal amount is added back to contribution room on January 1 of the following year
- Don't re-contribute in the same year unless you have unused room
Example:
Sophie has $30,000 in her TFSA and $5,000 in unused contribution room. She withdraws $25,000 for her down payment in June 2025. She can contribute $5,000 more in 2025. On January 1, 2026, she'll have $7,000 (new limit) + $25,000 (2025 withdrawal) = $32,000 in contribution room.
Which Account is Best for You?
The "best" account depends on your specific situation. Here's how to decide:
Choose FHSA If:
✅ You're a first-time home buyer (haven't owned a home in 5 years)
✅ You're in a medium to high tax bracket (to maximize the tax deduction)
✅ You're planning to buy within 5-15 years (enough time to contribute but within the participation period)
✅ You want maximum tax benefits (deduction + tax-free withdrawal)
✅ You don't want repayment obligations
Best for: Most first-time home buyers who qualify
Choose RRSP (HBP) If:
✅ You're a high-income earner (35%+ tax bracket)
✅ You've maxed out your FHSA ($40,000 limit)
✅ You need more than $40,000 for your down payment (HBP allows $60,000)
✅ You're confident you can repay over 15 years
✅ You're also saving for retirement (dual purpose)
Best for: High earners who need a larger down payment and can manage repayments
Choose TFSA If:
✅ You're not a first-time buyer (don't qualify for FHSA)
✅ You're in a low tax bracket (tax deduction less valuable)
✅ You want maximum flexibility (might use funds for something else)
✅ You're buying soon (within 1-3 years)
✅ You don't want any repayment obligations
✅ You've already used your HBP (can't use it again until repaid)
Best for: Anyone who values flexibility or doesn't qualify for FHSA/HBP
Optimal Savings Strategies
Most first-time home buyers should use a combination of these accounts. Here are proven strategies:
Strategy 1: FHSA First, Then RRSP (HBP)
Best for: High earners who need a large down payment
How it works:
1. Years 1-5: Contribute $8,000/year to FHSA (total $40,000)
2. Years 6+: Contribute to RRSP (up to $60,000 for HBP)
3. At purchase: Withdraw $40,000 from FHSA (tax-free, no repayment) + $60,000 from RRSP (tax-free, but must repay)
Total down payment: Up to $100,000
Example:
Chen earns $120,000 (40% tax bracket):
- FHSA contributions: $40,000 → Tax savings: $16,000
- RRSP contributions: $60,000 → Tax savings: $24,000
- Total tax savings: $40,000
- Down payment: $100,000 (no tax on withdrawal)
- Repayment: $4,000/year for 15 years (RRSP only)
Strategy 2: FHSA + TFSA (No Repayment)
Best for: First-time buyers who want zero repayment obligations
How it works:
1. Contribute to FHSA first (get the tax deduction)
2. Use TFSA for additional savings (flexibility)
3. At purchase: Withdraw from both (no repayment required)
Example:
Maya earns $75,000 (30% tax bracket):
- FHSA: $8,000/year for 5 years = $40,000 → Tax savings: $12,000
- TFSA: $7,000/year for 5 years = $35,000 → Tax savings: $0
- Total down payment: $75,000 + investment growth
- Repayment: $0
Strategy 3: All Three Accounts (Maximum Down Payment)
Best for: High earners with a long timeline who want the largest possible down payment
How it works:
1. Max out FHSA ($40,000 over 5 years)
2. Max out RRSP for HBP ($60,000)
3. Save additional funds in TFSA (no limit)
Example:
Raj and Priya (couple, combined income $200,000):
- Raj's FHSA: $40,000
- Priya's FHSA: $40,000
- Raj's RRSP (HBP): $60,000
- Priya's RRSP (HBP): $60,000
- Joint TFSA savings: $50,000
- Total down payment: $250,000
- Tax savings: ~$80,000 (from FHSA + RRSP contributions)
- Repayment: $8,000/year for 15 years (RRSP only)
Strategy 4: TFSA Only (Maximum Flexibility)
Best for: Low-income earners, uncertain timelines, or those who don't qualify for FHSA
How it works:
1. Contribute to TFSA as much as possible
2. Invest for growth (stocks, ETFs, balanced funds)
3. Withdraw when ready (no restrictions)
Example:
Jordan earns $45,000 (20% tax bracket):
- TFSA: $7,000/year for 5 years = $35,000
- Tax savings: $0 (but all growth is tax-free)
- Flexibility: Can use for home, emergency, or other goals
- Repayment: $0
Common Mistakes to Avoid
Mistake 1: Not Opening an FHSA Early Enough
The Problem: The 15-year participation period starts when you open your first FHSA, not when you contribute.
The Fix: Open your FHSA as soon as you're eligible, even if you can't contribute right away. This starts the clock and gives you maximum flexibility.
Example:
- Wrong: Wait until you have $8,000 saved, then open FHSA
- Right: Open FHSA immediately (even with $0), contribute when you can
Mistake 2: Over-Contributing to FHSA
The Problem: Contributing more than $8,000 in a single year results in a 1% per month penalty tax on the excess.
The Fix: Track your contributions carefully. Even if you have $15,000 in carry-forward room, you can only contribute $8,000 per year.
Example:
- Wrong: Contribute $15,000 in one year (thinking you have room)
- Right: Contribute $8,000 this year, $7,000 next year
Mistake 3: Not Repaying HBP on Time
The Problem: Missed HBP repayments are added to your taxable income, resulting in unexpected tax bills.
The Fix: Set up automatic annual RRSP contributions designated as HBP repayments.
Example:
- Wrong: Forget to repay $3,000 → Pay $1,050 in extra tax (at 35% rate)
- Right: Auto-contribute $250/month to RRSP as HBP repayment
Mistake 4: Using TFSA Before FHSA
The Problem: TFSA contributions don't give you a tax deduction, so you're missing out on immediate tax savings.
The Fix: If you qualify for an FHSA, max it out first ($8,000/year), then use TFSA for additional savings.
Example:
- Wrong: Contribute $15,000 to TFSA → $0 tax savings
- Right: $8,000 to FHSA + $7,000 to TFSA → $2,400 tax savings (at 30% rate)
Mistake 5: Withdrawing from RRSP Without Using HBP
The Problem: Regular RRSP withdrawals are fully taxable and subject to withholding tax.
The Fix: Always use the HBP program (Form T1036) when withdrawing for a first home.
Example:
- Wrong: Withdraw $30,000 from RRSP → Pay $10,500 in tax (35% rate)
- Right: Withdraw $30,000 under HBP → Pay $0 tax (but must repay)
Mistake 6: Not Considering Your Tax Bracket
The Problem: Tax deductions are most valuable in high tax brackets. Low earners might be better off with a TFSA.
The Fix: Calculate your actual tax savings before deciding.
Example:
- Low earner ($35,000 income, 20% rate): $8,000 FHSA contribution = $1,600 tax savings
- High earner ($100,000 income, 40% rate): $8,000 FHSA contribution = $3,200 tax savings
If you're in a low bracket now but expect higher income later, consider using a TFSA now and FHSA later.
Real-World Examples
Example 1: Young Professional (5-Year Timeline)
Profile:
- Name: Jessica
- Age: 26
- Income: $70,000
- Tax bracket: 30%
- Timeline: Buy in 5 years
- Down payment goal: $50,000
Strategy:
1. Open FHSA immediately (even with $0)
2. Contribute $8,000/year to FHSA for 5 years
3. Contribute $2,000/year to TFSA for additional savings
Results after 5 years (assuming 5% annual return):
- FHSA: $44,310 ($40,000 contributions + $4,310 growth)
- TFSA: $11,078 ($10,000 contributions + $1,078 growth)
- Tax refunds: $12,000 ($8,000/year × 30% × 5 years)
- Total available: $67,388
- Repayment: $0
Outcome: Jessica exceeds her $50,000 goal with no repayment obligations.
Example 2: High-Income Couple (7-Year Timeline)
Profile:
- Names: Marcus & Lisa
- Ages: 32 & 30
- Combined income: $180,000
- Tax bracket: 40%
- Timeline: Buy in 7 years
- Down payment goal: $150,000
Strategy:
1. Both open FHSAs immediately
2. Both contribute $8,000/year to FHSA for 5 years
3. Both contribute to RRSP in years 6-7 for HBP
4. Use TFSA for additional savings
Results after 7 years (assuming 5% annual return):
- Marcus FHSA: $44,310
- Lisa FHSA: $44,310
- Marcus RRSP (HBP): $20,000
- Lisa RRSP (HBP): $20,000
- Joint TFSA: $30,000
- Tax refunds: $48,000 (FHSA + RRSP contributions × 40%)
- Total available: $206,620
- Repayment: $2,667/year for 15 years (RRSP only)
Outcome: They exceed their goal and have a substantial down payment with manageable repayments.
Example 3: Lower Income, Flexible Timeline
Profile:
- Name: Ahmed
- Age: 24
- Income: $45,000
- Tax bracket: 20%
- Timeline: Uncertain (3-7 years)
- Down payment goal: $30,000
Strategy:
1. Use TFSA primarily (maximum flexibility)
2. Open FHSA but contribute minimally
3. Reassess when income increases
Rationale:
- Tax deduction only saves 20% ($1,600 on $8,000)
- Uncertain timeline means TFSA flexibility is valuable
- Can shift to FHSA later if income increases
Results after 5 years (assuming 5% annual return):
- TFSA: $38,830 ($35,000 contributions + $3,830 growth)
- FHSA: $8,467 ($8,000 contribution + $467 growth)
- Tax refunds: $1,600 (FHSA only)
- Total available: $48,897
- Repayment: $0
Outcome: Ahmed exceeds his goal and maintains flexibility for other life goals.
Frequently Asked Questions
Can I have both an FHSA and use the HBP?
Yes! You can withdraw from your FHSA and use the Home Buyers' Plan for the same home purchase, as long as you meet all the conditions for each program.
Example: Withdraw $40,000 from FHSA (tax-free, no repayment) + $60,000 from RRSP under HBP (tax-free, must repay) = $100,000 total down payment.
What happens if I don't buy a home?
FHSA: You must close your FHSA by the end of your maximum participation period (15 years or age 71). You can:
- Transfer the funds tax-free to your RRSP or RRIF
- Withdraw the funds (taxable)
RRSP: No impact. Funds stay in your RRSP for retirement.
TFSA: No impact. Funds stay in your TFSA for any purpose.
Can I use these accounts for a second home or investment property?
No. FHSA and HBP are only for first-time home buyers purchasing a principal residence. However, you can use a TFSA for any purpose, including a second home or investment property.
Should I invest my FHSA/RRSP/TFSA or keep it in cash?
It depends on your timeline:
- 1-2 years: High-interest savings account or GICs (safety)
- 3-5 years: Balanced portfolio (60% stocks, 40% bonds)
- 5+ years: Growth portfolio (80% stocks, 20% bonds)
Important: All three accounts can hold investments (stocks, ETFs, bonds, GICs). Don't leave them in cash unless you're buying very soon.
What if my spouse already owns a home?
FHSA: Your spouse's home ownership does NOT affect your eligibility. You can still open an FHSA if YOU haven't owned a home in 5 years.
HBP: Same rule. Your spouse's home ownership doesn't disqualify you.
Can I transfer money between these accounts?
RRSP → FHSA: Yes, you can transfer up to your FHSA contribution room (subject to $8,000 annual limit). The transfer is not tax-deductible.
FHSA → RRSP: Yes, you can transfer tax-free when closing your FHSA.
TFSA → FHSA or RRSP: No direct transfer. You must withdraw from TFSA (tax-free) and contribute to FHSA/RRSP (subject to contribution limits).
Final Recommendations
For Most First-Time Home Buyers:
- Open an FHSA immediately (even if you can't contribute yet)
- Max out FHSA first ($8,000/year for 5 years = $40,000)
- Use TFSA for additional savings (flexibility + no repayment)
- Consider RRSP (HBP) only if you need more than $40,000 and can manage repayments
For High-Income Earners:
- Max out FHSA ($40,000)
- Use RRSP (HBP) for additional down payment (up to $60,000)
- Supplement with TFSA if needed
- Total potential: $100,000+ per person
For Low-Income Earners or Uncertain Timelines:
- Prioritize TFSA (flexibility)
- Open FHSA but contribute minimally
- Shift to FHSA when income increases or timeline becomes clear
Next Steps
Ready to start saving for your first home? Here's what to do:
- Calculate your down payment goal using our FHSA Calculator
- Open your accounts at your bank or online brokerage
- Set up automatic contributions to stay on track
- Invest appropriately based on your timeline
- Track your progress and adjust as needed
Need help with the numbers? Use our free FHSA Tax Savings Calculator to see exactly how much you'll save with each strategy.
Have questions? Ask our AI tax assistant for personalized guidance based on your situation.
Conclusion
Choosing between an FHSA, RRSP (HBP), and TFSA doesn't have to be complicated. For most first-time home buyers, the FHSA offers the best combination of tax benefits and flexibility. High earners should consider using both FHSA and RRSP (HBP) for maximum down payment potential. And the TFSA remains an excellent choice for those who value flexibility or don't qualify for the other programs.
The key is to start early, contribute consistently, and invest appropriately for your timeline. With the right strategy, you'll be well on your way to homeownership.
Remember: This guide provides general information. Your optimal strategy depends on your specific situation, including income, tax bracket, timeline, and down payment goal. Consider consulting with a financial advisor or tax professional for personalized advice.
Last updated: January 2025
Disclaimer: This article is for educational purposes only and does not constitute financial or tax advice. Tax rules and limits are subject to change. Always verify current rules with the CRA or a qualified tax professional.