FSO NEWS: FHSA vs RRSP for First-Time Home Buyers

Key takeaways

An FHSA gives you up to $8,000 a year in deductible room ($40,000 for life), and qualifying withdrawals for a first home are tax-free and do not need to be repaid.
An RRSP is a retirement account first. Under the Home Buyers' Plan (HBP) you can withdraw up to $60,000 for a first home, but you must repay it over 15 years or the missed amount is added to your income.
You can use both for the same home, so the choice is often about order and room, not either/or.
RRSP room depends on your earned income (2026 dollar limit: $33,810); FHSA room does not, but you must open the account to start using it.

Saving for a first home in Canada means choosing between two registered accounts that both give you a tax deduction: the First Home Savings Account (FHSA) and the Registered Retirement Savings Plan (RRSP). They work differently once the money comes out.

How each account works for a home purchase

The FHSA

The FHSA was designed for one job: saving for a first home. According to the Canada Revenue Agency (CRA), your participation room in the year you open your first FHSA is $8,000, contributions are generally deductible, and withdrawals used to buy a qualifying home are tax-free. The lifetime limit is $40,000. Unused room can be carried forward, but the carry-forward is capped at $8,000, so your room in a later year can be as high as $16,000.

To open one, you must be a Canadian resident, 18 or older (19 in provinces where that is the age to sign a contract), 71 or younger at the end of the year, and a first-time home buyer. That means you did not live in a home that you, or your spouse or common-law partner, owned in the current calendar year or the previous four.

The RRSP and the Home Buyers' Plan

Your RRSP deduction limit is generally 18% of your previous year's earned income, up to an annual dollar limit ($33,810 for 2026), plus any unused room, and reduced by pension adjustments. Under the HBP, you can withdraw up to $60,000 from your RRSPs for a qualifying home without tax being withheld. The catch is repayment: you have 15 years to put the money back. For first withdrawals made from 2026 to 2028, the CRA says the 15-year repayment period starts in the fifth year after the year of withdrawal. For a 2026 withdrawal, the first repayment year is 2031.

Side-by-side comparison

Feature	FHSA	RRSP (with HBP)
Annual limit	$8,000 of participation room (plus carry-forward up to $8,000)	18% of prior-year earned income, up to $33,810 for 2026, plus unused room
Lifetime limit	$40,000	No lifetime cap, but room depends on your income
Tax deduction on contributions	Generally yes	Yes
Home withdrawal	Tax-free if you meet the qualifying withdrawal conditions; no repayment	Up to $60,000 under the HBP; must be repaid over 15 years
If you don't buy a home	Taxable withdrawal, or transfer directly to an RRSP or RRIF	Normal RRSP rules; withdrawals are taxable income
Time limit	Closes by the earliest of 15 years after opening, the year you turn 71, or the year after your first qualifying withdrawal	Contribute until the end of the year you turn 71

Worked example 1: the tax refund on FHSA contributions

Priya is 28, rents, and has never owned a home. She opens an FHSA in 2026 and contributes $8,000. For illustration only, assume her combined federal and provincial marginal tax rate is 30%. Her deduction could reduce her tax by about $2,400 ($8,000 × 30%). Your own rate depends on your income and province, so treat this as an example, not a prediction.

If Priya contributes only $5,000 in 2026, she has $3,000 of unused room. Under the CRA's carry-forward rule, her 2027 room becomes $11,000 ($8,000 plus $3,000). If she contributes $8,000 a year for five years, she reaches the $40,000 lifetime limit, before any investment growth.

Worked example 2: the HBP repayment schedule

Marcus withdraws $30,000 from his RRSP under the HBP in 2026. Because the repayment period starts in 2031 and runs 15 years, his minimum repayment is $2,000 a year ($30,000 ÷ 15), from 2031 through 2045. He makes the repayment by contributing to his RRSP and designating the amount as an HBP repayment on his return (Schedule 7). If he repays only $1,500 in a year, the $500 shortfall is added to his income for that year.

Worked example 3: using both for one home

Sam and Jo are a couple who have never owned a home. Each opens an FHSA and, over five years, each reaches the $40,000 limit: $80,000 combined before growth. If each also has $60,000 in an RRSP, each could withdraw that under the HBP for the same home, as the CRA says you can make an HBP withdrawal and an FHSA qualifying withdrawal for the same qualifying home when you meet the conditions for each. That is a theoretical maximum, and the HBP part still has to be repaid.

Rules that trip people up

Qualifying withdrawal conditions (FHSA). You need a written agreement to buy or build a qualifying home, with the purchase or completion before October 1 of the year after the withdrawal. You must be a resident of Canada, intend to occupy the home as your principal residence within one year, not have acquired it more than 30 days before the withdrawal, and submit Form RC725 to your issuer.
Two first-time buyer tests. The CRA says the test for a withdrawal differs from the test for opening the account, so check both.
Closing the account. After your first qualifying withdrawal, your maximum participation period ends on December 31 of the following year. If property remains in an FHSA after the participation period ends, its fair market value is included in your income.
RRSP transfers. A transfer from an RRSP to an FHSA is not deductible and uses up FHSA room.

Which should you prioritize?

Many first-time buyers fill the FHSA first because home withdrawals are tax-free and need no repayment, keeping the RRSP for retirement or the HBP if they need more. The right order depends on your income, tax bracket, savings and timeline. If you are unsure you will buy, unused FHSA money can be moved directly to an RRSP or RRIF without immediate tax.

Check your own FHSA and RRSP room in your CRA My Account before contributing, and confirm account details with your financial institution.

Sources

This article is for general information only and is not financial, tax or legal advice. Rates and limits were last reviewed on October 27, 2026.

This article is for general information only and is not financial, tax, legal or insurance advice. Check the official sources linked in the article and speak with a qualified professional about your own situation.