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The ABCs of investment accounts: How do FHSAs work?

First Home Savings Accounts give homebuyers a new savings option
Scotia Wealth Management Senior Wealth Advisor, Dave Lee, offers Total Wealth Planning in White Rock. To book an appointment, call 604.535.4743 or email

Is the FHSA a better option than your Registered Retirement Savings Plan or Tax-Free Savings Account? The full answer depends on factors like your current income, expected future income, family plans and more.

“In many ways, it’s the best of both worlds for someone saving for their first home, but the contribution limits are very small relative to real estate prices,” says Dave Lee, Senior Wealth Advisor with Scotia Wealth Management in White Rock.

First things first: What is a First Home Savings Account?

A First Home Savings Account is a registered plan that allows a prospective first-time home buyer to save for a first home. To open an FHSA, you must be:

  • Between the ages of 18 and 71 years as of Dec. 31 of the year you open your FHSA
  • A resident of Canada
  • A first-time home buyer – eligibility includes not living in a principal residence that you or a spouse / common-law partner owned in the current and previous four calendar years.

The maximum lifetime contribution is $40,000, and when the time comes to buy your home, any growth from your investments is tax-free. The annual limit is $8,000 and up to $8,000 in unused room can be carried to a future year but unlike TFSAs, an account must be opened to accrue room.

What kinds of investments are permitted in a FHSA?

“Generally, investments permitted for your RRSP are also permitted in your FHSA, such as cash, mutual funds, GICs, bonds and most securities listed on a designated stock exchange including ETFs,” Dave says.

How does the FHSA differ from a TFSA or RRSP?

  • For Registered Retirement Savings Plans, annual contribution room is set at 18 per cent of employment income to a maximum of $31,560 in 2024. Contributions reduce taxable income, but withdrawals are taxed. This works best when contributions are made during high income years and withdrawn in lower income retirement years. Careful planning for investments, other pensions and old age security claw back rules are needed to ensure maximum benefit.
  • Through the Home Buyers’ Plan (HBP), first-time homebuyers can withdraw up to $35,000 from RRSPs to buy or build a qualifying home, but this needs to be paid back to your RRSP within 15 years to avoid taxation.
  • The Tax-Free Savings Account was established in 2009 as an additional savings vehicle for Canadians. While you don’t receive tax credits for contributions like you do for your RRSP, any growth within the account is tax-free while it grows and when it’s removed. Withdrawals, including those for purchasing a home do not need to be repaid.
  • Annual TFSA contributions are the same for every Canadian resident. For 2024 the new room is $7,000. Any space not used from previous years carries forward, and now totals $95,000 for those who have been adults since 2009.

One of the first steps to home ownership is understanding how to make the most of your savings strategies. Watch for next month’s column when we look at how these different options stack up.

READ MORE: CRA MyAccount: Quick access to your tax returns, RRSP and TFSA room and more

Dave Lee CIM, CFP, FCSI is a Senior Wealth Advisor with Scotia Wealth Management in White Rock. He can be reached at or 604.535.4743.

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