FHSA after 3 years: $24K room, RRSP HBP comparison

How the FHSA works in 2026

The FHSA gives you the best of both RRSP and TFSA specifically for first home savings.

Mechanics: • Contribution limit: $8,000/year • Lifetime limit: $40,000 • Carry-forward: up to $8,000 of unused room (so max yearly contribution is $16,000) • Tax deduction: full contribution deducted from your income (like RRSP) • Tax-free growth: dividends, interest, capital gains inside FHSA = tax-free • Tax-free withdrawal: for a qualifying first-home purchase = tax-free • Account lifespan: max 15 years OR until age 71 OR until you buy a first home

Eligibility: • Canadian resident • Age 18-71 (Quebec: 18-71) • Have not owned a home in the current year or any of the 4 preceding years

Per-year room timeline: • 2023 (opened): $8,000 • 2024: +$8,000 → cumulative $16,000 • 2025: +$8,000 → cumulative $24,000 • 2026: +$8,000 → cumulative $32,000 • 2027: lifetime cap of $40,000 reached

Tax savings worked example

Scenario: 30-year-old Ontario engineer earning $100,000, marginal rate ~43%

Contribute the full $8,000 in 2026: • Tax deduction: $8,000 • Tax saved at 43%: $3,440 refund • Net out-of-pocket cost of $8,000 contribution: $4,560

Grow at 6% over 5 years: • $8,000 → $10,705 (no tax on the $2,705 growth)

If you save the full $40K over 5 years and grow at 6%: • Total contributed: $40,000 • Total tax saved on contributions (43% marginal): $17,200 • Future value at age 35: ~$58,500 • Net out-of-pocket cost of $40K saved: $22,800 • Effective rate of return on out-of-pocket: 156% over 5 years

For comparison - the same $40K saved outside an FHSA: • Tax saving: $0 • Out-of-pocket: $40,000 • 6% growth taxed at 43%: net 3.42% • 5-year future value: ~$47,300

FHSA wins by ~$30K out-of-pocket equivalent over 5 years - a massive advantage.

FHSA vs RRSP Home Buyers' Plan

The RRSP Home Buyers' Plan (HBP) lets you withdraw up to $60,000 (raised from $35K in 2024) tax-free from your RRSP for a first home, then repay over 15 years.

FHSA advantages over HBP: • No repayment required (HBP requires 1/15 repayment per year - skip a payment and that 1/15 becomes taxable income) • Withdrawal is fully tax-free (HBP withdrawal is technically a loan from yourself) • Both contributions AND withdrawals are tax-advantaged • Doesn't reduce your RRSP balance

HBP advantages over FHSA: • Higher single-withdrawal amount ($60K vs $40K) • You can have larger contribution room (RRSP scales with income) • Already-saved RRSP money can be used (no need for a 5-year savings runway) • You CAN own a home and still have an RRSP (FHSA closes once you buy)

Best play: stack them • FHSA: $40,000 (max lifetime) • HBP: $60,000 • Per person: $100,000 tax-advantaged first-home funds • Couple: $200,000 combined

2026 sample: 32-year-old couple buying $750K Toronto condo: • Need 20% deposit to avoid CMHC insurance: $150,000 • Both have full FHSA + HBP available • Pull $50K each from FHSA + $25K each from HBP = $150K total • Zero tax on the withdrawal • Keep remaining HBP room available for emergencies

Investment strategy inside the FHSA

What can the FHSA hold? • Cash / GICs / HISA • Stocks (TSX, US, foreign) • ETFs • Mutual funds • Bonds • Options (call/put, with broker permission)

What it CANNOT hold: • Private company shares • Real estate directly • Crypto directly (some ETFs OK) • US LPs

Strategy by time horizon:

Buying in 1-2 years: capital preservation. HISA at 4-4.5%, short-term GICs. Don't risk equities with a near-term goal.

Buying in 3-5 years: 60-70% balanced ETF (XBAL or VBAL), 30-40% HISA/GIC.

Buying in 5+ years: 80-100% equity ETFs. The long horizon justifies volatility. Consider XEQT, VEQT, or international tilt with VXC.

Common mistake: holding cash in an FHSA at 1% interest. You're wasting the tax-free growth wrapper. At minimum use a HISA ETF (CASH.TO at 4.4%) or a HISA at one of the big brokerages (Wealthsimple, EQ Bank).

Big tax-efficient angle: hold US-listed dividend ETFs in your TFSA (15% US withholding) and capital-growth ETFs in the FHSA (no dividend tax problem). Optimize across all three account types.

What to do at decision point

You buy a qualifying first home: withdraw your FHSA balance tax-free. The account closes after the withdrawal.

You don't buy within 15 years (or hit age 71): the FHSA must close. Options: 1. Roll to RRSP: transfer the balance to your RRSP (no tax, no impact on RRSP room) - preserves the tax-free growth but withdrawals become taxable RRSP withdrawals 2. Withdraw and pay tax: the balance becomes taxable income in the year you withdraw

You decide you'll never buy: transfer to RRSP. Even though you used FHSA for "first home savings," there's no penalty for changing your mind - you just lose the tax-free withdrawal benefit.

You buy a home but want to keep the FHSA open: not possible. Buying a qualifying first home triggers the FHSA closure.

Both spouses have FHSAs and you buy together: both can withdraw simultaneously. Both can claim the qualifying home purchase. Both accounts close. You've maxed the dual benefit.

You move provinces during the FHSA: no effect. FHSA is a federal program.

You leave Canada: contributions stop. The FHSA stays open but is now considered "non-resident FHSA" - any withdrawal becomes taxable income in your country of residence. Most expats roll to RRSP and close before leaving.