WealthTFSA vs FHSA — which for first home?
FHSA in 30 seconds
Launched 2023. Limit: $8,000/yr, $40,000 lifetime. Combines 2 advantages:
- Tax deduction on contributions (like RRSP)
- Tax-free withdrawal for first home (like TFSA)
Conditions: 18+, never owned in past 4 years. Max 15 years to use.
| Component | Amount |
|---|---|
| Contribution (at 35% marginal rate) | $8,000 |
| Tax deduction returned | $2,800 |
| 5-year growth at 6% | $40,000 → ~$53,500 |
| Withdrawal for purchase | Tax-free |
On a maxed-out $8,000 contribution at a 35% marginal tax rate, the FHSA returns $2,800 immediately as a deduction, then the $40,000 lifetime total can grow to roughly $53,500 over 5 years at 6%, withdrawn tax-free.
FHSA advantage — concrete numbers
$8,000 contribution at 35% marginal:
- Tax deduction: $2,800 returned
- 5-year growth at 6%: $40,000 → ~$53,500
- Withdrawal for purchase: tax-free
| FHSA | TFSA | |
|---|---|---|
| Annual limit | $8,000/yr | $7,000 (2026) |
| Lifetime/accumulated limit | $40,000 lifetime | up to $109,000 accumulated |
| Tax deduction on contribution | Yes (like RRSP) | No |
| Withdrawal | Tax-free, for first home only | 100% free, for anything |
| Eligibility | 18+, never owned in past 4 years | No ownership condition |
| Time limit | Max 15 years to use | None mentioned |
FHSA combines a tax deduction with a tax-free withdrawal, but only for a first home. TFSA has no deduction but offers unrestricted, penalty-free withdrawals for any purpose.
TFSA — more flexible
$7,000 limit in 2026, accumulated up to $109,000. No deduction but 100% free withdrawals for anything.
FHSA — $40,000
- 8,000/yr for 5 years
- Tax deduction + tax-free withdrawal
- Prioritized first in the optimal order
TFSA + RRSP HBP — $60,000
- $30,000 TFSA — flexible savings
- $30,000 RRSP HBP — up to $60,000 available
- Together with FHSA: $100,000 + growth, fully tax-free
For a first home in 5 years with a $100,000 target, the article's suggested split is $40,000 FHSA, $30,000 TFSA, and $30,000 via the RRSP Home Buyers' Plan (HBP, up to $60,000 available).
Optimal combination
First home in 5 years with $100,000 savings target:
- $40,000 FHSA
- $30,000 TFSA
- $30,000 RRSP HBP (up to $60,000)
Total down payment: $100,000 + growth, fully tax-free!
Pitfall: prioritize FHSA before TFSA
Optimal order: (1) Max FHSA first, (2) Then TFSA, (3) RRSP HBP at purchase.
If not buying in 15 years
Unused FHSA: mandatory transfer to RRSP (without affecting RRSP room).
Frequently Asked Questions
FHSA + TFSA + RRSP HBP?
Yes. The 3 are complementary. Winning strategy for first-time buyer.
FHSA for spouse co-owner?
Yes. Each spouse can have FHSA. Total possible: $80,000 + growth.
Transfer FHSA to RRSP, lose advantage?
Lose only tax-free withdrawal. RRSP keeps tax deduction and shelter.
Contribute more than $8,000/yr?
No. $8,000 is strict annual max. Unused carries up to additional $8,000.
Sources & references
Educational content. Figures and rules verified against the official sources above; tax amounts change annually.