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Plain English
Canada created the FHSA specifically for first-time home buyers. When you put money in, you get a tax deduction just like an RRSP — the government gives you money back at tax time. But unlike an RRSP, when you take the money out to buy your first home, you pay zero tax. It's like getting a gift on the way in AND the way out. You can put in $8,000 per year, up to $40,000 total. After you've maxed that, you can also use the Home Buyers' Plan to borrow up to $60,000 from your RRSP tax-free (you pay it back over 15 years).
You earn $75,000 and open an FHSA. You contribute $8,000 this year. At a 29.65% combined rate, you get a $2,372 tax refund. When you buy your first home in 4 years, you withdraw the full balance — let's say $35,000 with growth — and pay $0 in tax. Compare that to an RRSP where the HBP withdrawal must be repaid, or a TFSA where you got no refund going in.
Show the analysis
The FHSA (ITA s.146.6) uniquely synthesizes the deduction mechanic of the RRSP with the tax-free withdrawal mechanic of the TFSA, creating a dual-yield vehicle unavailable in any other registered account. The $8,000 annual cap and $40,000 lifetime ceiling constrain total deployment, but the marginal value per dollar is unmatched: a 30% earner receives $0.30 per dollar on contribution AND $0.00 tax on withdrawal. The overflow strategy combines the FHSA with the HBP ($60,000 tax-free RRSP withdrawal, amortized repayment over 15 years starting the second year after withdrawal).
FHSA: $8,000 × 29.65% = $2,372 refund. Withdrawal for home purchase: $0 tax. HBP overflow: $60,000 RRSP withdrawal, $0 tax at withdrawal, repaid at $4,000/year over 15 years. Combined tax-sheltered home capital: $40,000 (FHSA lifetime) + $60,000 (HBP) = $100,000, with $40,000 of that permanently tax-free.
Edge cases
- If you don't buy within the 15-year FHSA participation period, the balance can transfer tax-free into your RRSP or RRIF without consuming existing RRSP room.
- Unused FHSA room carries forward: if you contribute $0 in year one and $16,000 in year two, that's valid (up to the $8,000 annual cap plus $8,000 carry-forward).
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Every number on this site is sourced from CRA publications, the Income Tax Act, or provincial fiscal releases. We show the math, cite the sources, and never tell you what to do with your money.