What is the FHSA?
The FHSA launched in 2023 and is the most generous registered account ever offered to first-time home buyers. Contributions are deductible like an RRSP. Growth and qualifying withdrawals for a first home are tax-free like a TFSA. The cap is $8,000 per year (with up to $8,000 of carry-forward room) and $40,000 lifetime. You must be a Canadian resident, at least 18, and a first-time home buyer. The account must be closed within 15 years or by the year you turn 71, whichever comes first.
Max the FHSA at $8,000 a year for five years, invested in a balanced ETF earning 6%. You contribute $40,000. At withdrawal in year five, the balance is roughly $48,000, fully tax-free if used as part of a qualifying home purchase. On top of that, the $40,000 of deductions saved you roughly $12,000 in tax over those years at a 30% marginal rate. Total benefit: about $20,000 over a regular savings account.
Leaving the FHSA in cash inside a high-interest savings account for a decade. The wrapper is the gift, the investment choice still matters. Even a balanced ETF over five years usually beats 3% cash by a wide margin.
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