Every registered account in Canada makes you choose. The RRSP deducts your contribution but taxes the withdrawal. The TFSA taxes nothing on the way out but gives no deduction going in. The First Home Savings Account, introduced in 2023, refuses to choose. For a qualifying first home, you get the RRSP’s deduction and the TFSA’s tax-free withdrawal at the same time. That is the single best tax treatment available to a Canadian saver, and it is aimed squarely at the down payment.
The 2026 numbers
You can contribute $8,000 per year, up to a $40,000 lifetime limit. Unused annual room carries forward, but only one year at a time, so the most you can ever contribute in a single year is $16,000 (this year’s $8,000 plus one carried-forward $8,000). Room only begins accumulating once you actually open the account, which is the argument for opening one early even with a small deposit.
Contributions are deductible against your income, exactly like an RRSP contribution. Qualifying withdrawals to buy a first home, including the growth, come out completely tax-free, exactly like a TFSA.
The rules that define it
To open an FHSA you must be a Canadian resident, at least 18, and a first-time home buyer, meaning you have not lived in a home you owned in the current year or the previous four. The account can stay open for up to 15 years, and you must use it by the end of the year you turn 71.
The clever part is what happens if your plans change. If you never buy a home, the FHSA does not strand your money. You can transfer the full balance, including all the growth, into your RRSP or RRIF with no tax and without using any RRSP room. In effect, the worst case turns your FHSA into extra RRSP space. There is very little downside to opening one.
How it fits with the rest
For a first-time buyer, the priority order is usually straightforward. Fund the FHSA first, because no other account gives you a deduction and a tax-free withdrawal for the same dollar. It also stacks with the RRSP Home Buyers’ Plan, so a couple can combine FHSA balances and HBP withdrawals into a sizable tax-advantaged down payment.
The one catch is discipline. Because the money is meant for a home, treating the FHSA as a general investment account undercuts its purpose. Use it for the goal it was built for, and it is hard to beat.
To see your FHSA room for 2026 next to your TFSA and RRSP, run the 2026 contribution room calculator.