All the Numbers

The First Home Savings Account

From the All the Numbers wiki · Savings accounts

The FHSA is the only registered account that is deductible going in and tax-free coming out. For a first-time buyer it beats both the TFSA and the RRSP, which is why All the Numbers' "where should my next $10,000 go?" comparison puts it first regardless of the rate path.

The rules

  • $8,000 per year, with one year of unused room carried forward — so at most $16,000 in any single year.[1]
  • $40,000 lifetime.[1]
  • You may hold more than one FHSA, but both limits are pooled per person across all of them, and so is the participation period: it starts when you open your first one. CRA's own wording is plural throughout — "an amount withdrawn from your FHSAs".
  • Contributions are deducted from income, like an RRSP.[2]
  • A qualifying withdrawal for a first home is tax-free and does not have to be repaid.
  • The participation period ends at the earliest of: the 15th anniversary of opening, the end of the year you turn 71, or the year after your first qualifying withdrawal. Whatever is left rolls into an RRSP without using RRSP room.[3][4]
  • Direct transfers. Moving money straight from an FHSA to your own RRSP, RRIF or another FHSA is not income, is not deductible and uses no RRSP room.[5] Moving money from an RRSP into an FHSA is also not income and not deductible, but it counts against the FHSA's annual and $40,000 limits.[6] All the Numbers has no transfer event, so neither route appears in a plan except the automatic roll-over at the end of the participation period.

If you never buy

You do not have to plan to buy a home to open an FHSA: the CRA asks only that you are a first-time buyer, meaning you have not lived in a home you or your spouse owned this year or in the previous four. If you never buy, what is left moves to your RRSP at the end, tax-free and without using your RRSP room. So for a first-time buyer an FHSA is at least as good as an RRSP, with up to $40,000 of extra room. With leftover cash put to work, All the Numbers fills it first while you are first-time buyers, with or without a home in the plan, and puts nothing in once you own the home you live in.[7]

What the engine does

  • Tracks room, including the single year of carryforward, and warns when a contribution is trimmed to fit.
  • Values the deduction as a refund the following April, at your own marginal rate, rather than netting it against the month's tax. That is when the money actually arrives.
  • Rolls the balance into an RRSP when the participation period ends, and warns if it had to wind up as taxable income instead. In All the Numbers the roll-over happens that November, tax-free and using no RRSP room, and an RRSP is opened for the purpose if the person has none.[8] A first-time purchase inside the period winds the account up instead. See the Home Buyers' Plan and sourcing a down payment for how the money is used at purchase.
  • Cuts a contribution back to the room left that month; the part refused stays in cash, and an FHSA excess is never modelled.[9]
  • Refuses to deduct a contribution made after a qualifying withdrawal, which the rules do not allow.
  • Assumes a withdrawal you flag is a qualifying one — the engine knows your dates, not your history, so eligibility is asserted rather than verified.
  • Takes the year you opened your FHSA and what you have contributed to date, and works this year's room out from them. Give neither and it assumes the account opens with the plan and holds nothing. That is the generous assumption: it hands you a fresh $40,000 of room and the deductions on all of it, so the plan says so.[10] If the account holds a balance but no history, the plan instead assumes it was opened just early enough to have received all of that balance in contributions, with no growth, and works this year's room from that.

Working your room out from two answers

Only one unused year may ever be carried forward, and that cap is what makes room derivable from a total rather than a contribution history:

carry forward = min($8,000, $8,000 × (years open before this one) − contributed)
room this year = min($8,000 + carry forward, $40,000 − contributed)

No matter how the past contributions were spread across the open years, the carryforward standing today is the same, so the plan does not need to ask you year by year.

The blind spot is this year. "Contributed so far" includes anything you have already put in since January, and nothing separates that from earlier years — so if you have contributed this year, the derived figure is up to $8,000 too generous. CRA publishes the real number as your FHSA participation room in My Account; entering it replaces the estimate.

Note that the balance is not the answer to "contributed so far": growth inside the account used no room, so $24,000 contributed that has grown to $27,000 is still $24,000.

Because the limits are pooled, these are asked once per person, not once per account. Two FHSAs that were given different histories cannot be added without inventing room, so the first one is used and the plan says so. The opening year is the exception: the earliest one governs, since that is when the participation period actually began.

What it deliberately does not

Death, marriage breakdown, becoming a non-resident, a failed qualifying withdrawal and RRSP-to-FHSA transfers are all unmodelled.

See also

  • Auto-allocation · When switched on, money left after spending and your own contributions is placed for you down a priority list — FHSA, then RRSP, then TFSA, then non-registered by default — each account taking what its room allows. Every dollar it moves is shown, by account, on each month and year.
  • Buying a cottage · A cottage is a second home for you and your family, kept alongside the home you live in. It can be bought with as little as 5% down if it is usable all year, or 10% if it is seasonal, but first-time buyer help, the Home Buyers' Plan and the FHSA cannot pay for it.
  • Closing costs and the cash to close · The cash a buyer pays on closing day is the down payment, the land transfer tax after any first-time buyer refund, the taxes and fees on the purchase, and one amount for legal and inspection costs that starts at $3,000. Adjustments are not worked out unless they are added to that amount.
  • Contributions the plan could not fund in full · Each month's leftover joins cash, and each contribution takes what cash can give it, in the order the accounts are listed. A contribution that cash cannot cover is funded in part rather than by an overdraft that does not exist, and the plan says so.
  • Net worth, as the plan counts it · Net worth is everything the plan holds (cash, investment and registered accounts, homes at market value) minus mortgages, credit lines, debts and tax owing. It is not reduced for selling costs or for tax on money still in an RRSP.
  • Over-contributions to a TFSA or RRSP · Putting more into a TFSA or RRSP than your room allows is taxed at 1% a month on the excess. An RRSP has a $2,000 cushion that is not taxed. All the Numbers never lets a contribution exceed room, so a plan does not include this tax.
  • Renting versus buying · All the Numbers compares a plan that buys a home with the same plan that never buys, and the money the home would have taken stays in your accounts and is saved like any other leftover cash. It shows when owning pulls ahead on net worth, if it does. It is a comparison under assumptions, not a verdict.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • Tax withheld from pay, and the April refund · Employers withhold income tax, CPP and EI from each paycheque as an estimate. The real tax is worked out on the return, and the difference arrives or is owed the following April.
  • TFSA contribution room · Room starts accruing the year you turn 18, not the year you open an account, and it never expires. Withdrawals come back the following January. Limits past 2026 have not been announced, so the plan projects them by the rule the Act sets and says so.
  • The Home Buyers' Plan · Up to $60,000 out of an RRSP, untaxed, for a first home — but it is a loan to yourself, repaid over fifteen years, and a missed repayment is taxed as income that year.
  • The savings accounts at a glance · The TFSA, RRSP, FHSA, RESP, RRIF and non-registered account each have their own room, tax treatment and withdrawal rule. This page gives one short paragraph on each, with the entry that covers it in full.
  • When the plan runs short of cash · When a month needs more money than the plan has, it draws savings in a set order, then borrows on a home equity line at 5.13% and an unsecured line at 8.38%, as far as a lender would lend. When no lender would lend more, the projection stops.
  • Where the down payment comes from · The cash to close is assembled from the plan's projected balances in a fixed order — FHSA, TFSA, unregistered, HBP, then taxed RRSP — and each dollar is priced for what taking it costs.
  • Who the plan is about · A plan covers one person or two. Where a birth year is missing the plan assumes the person is 40 and born on 1 January, says so on the page, and uses that age for tax, pension and account rules until the real one is entered.

References

  1. ↑CRA — First Home Savings Account · FHSA: $8,000 annual limit; $40,000 lifetime; unused room carries forward ONE year only (max $16,000 in a single year); non-qualifying withdrawal = ordinary income with RRSP-style withholding; qualifying-home closing deadline = end of year following first withdrawal · See the source · effective 2023-04-01
  2. ↑CRA — Tax deductions for FHSA contributions · FHSA contributions are deductible from income for the contribution year or a future year (RRSP-like); lifetime deduction maximum $40,000; unclaimed deductions carry forward indefinitely; transfers in from an RRSP are NOT deductible · See the source · effective 2023-04-01
  3. ↑CRA — Withdrawals and transfers out of your FHSAs · FHSA maximum participation period ends Dec 31 of the year of the EARLIEST of: 15th anniversary of opening the first FHSA; turning 71; the year following the first qualifying withdrawal. Property left at period end loses FHSA status and its fair market value becomes taxable income unless directly transferred · See the source · effective 2023-04-01
  4. ↑CRA — Withdrawals and transfers out of your FHSAs (worked example: "no tax consequences and there will be no impact on his unused RRSP deduction room") · Unused FHSA property may be transferred directly to an RRSP or RRIF (Form RC721) on a tax-deferred basis; the transfer does not use RRSP deduction room and does not reduce it · See the source · effective 2023-04-01
  5. ↑ITA 146.6(7)(b)(ii), 146.6(8) ("no deduction may be made... in respect of the amount"); 146.6(9) taxable transfer otherwise · Direct FHSA → RRSP/RRIF (or another FHSA) of the same individual: no income, no deduction, no RRSP room used; limited to FMV less any excess FHSA amount · See the source · effective 2023-04-01
  6. ↑ITA 146(16)(a.2); 146.6(1) "annual FHSA limit" (b) E − F; 146.6(5)(b)(ii) · Direct RRSP → FHSA transfer: no income, no deduction, counts against FHSA participation (annual limit $8,000 + carryforward − net RRSP-to-FHSA transfers) and the $40,000 lifetime deduction · See the source · effective 2023-04-01
  7. ↑Our convention; CRA — Opening your FHSAs: a first-time home buyer is one who "did not live in a qualifying home... that you owned or jointly owned in this calendar year or in the previous 4 calendar years"; no intention to buy is asked · With leftover cash put to work, an FHSA takes it (first in the default order) only while the household are first-time buyers, with or without a home purchase in the plan; a household living in a home it owns, or buying one as repeat buyers, puts nothing in. What no home uses moves to the RRSP at the end of the participation period; reported on the run, with the reminder that an FHSA can be opened by someone who never buys · effective 2026-10-28
  8. ↑ITA 146.6(16) (maximum participation period), 146.6(7)–(8) (direct transfer to an RRSP/RRIF, no room), 146.6(17) (FMV deemed received otherwise); CRA "Transfers and withdrawals"; our convention · An FHSA the plan carries to the end of its participation period — 31 December of the 15th year after it was opened — is rolled into the holder's RRSP that November (tax-free, no RRSP room used) and closed; an RRSP is opened for it when the plan has none; a first-time buyer's purchase inside the period winds it up instead · effective 2026-09-20
  9. ↑CRA — TFSA/RRSP/FHSA over-contributions are taxed 1% a month (ITA 207.02, 204.1, 207.021); our convention · A contribution event flagged contributes no more than the TFSA/RRSP/FHSA room left that month (deducting no more than it contributed); what the room refuses stays in cash, never posted as an excess · effective 2026-09-20
  10. ↑CRA — FHSA participation room ($8,000 a year, $40,000 lifetime, one year of carry-forward); our convention · An FHSA holding a balance with no history given is taken as opened just early enough to have contributed all of it (no growth); this year's room then follows the limits from that history ($8,000 plus up to one unused year, never past $40,000 for life), until the CRA figures are entered; reported on the run · See the source · effective 2026-09-20