If you plan to buy your first home in Canada, the FHSA usually comes first. You get a tax deduction going in, like an RRSP, and tax-free withdrawals for your home, like a TFSA. The TFSA wins when you are not sure you will buy, you need flexibility, or you have already used your FHSA room.
TFSA vs FHSA at a glance
| FHSA | TFSA | |
|---|---|---|
| Who can open one | Canadian residents 18+ who are first-time home buyers | Canadian residents 18+ with a SIN |
| Annual limit | $8,000 | $7,000 in 2026 |
| Lifetime limit | $40,000 | None (room adds up each year) |
| Unused room | Up to $8,000 carries forward | All unused room carries forward |
| Tax deduction | Yes | No |
| Withdrawals | Tax free for a qualifying first home | Tax free for anything |
| Time limit | 15 years, or the end of the year you turn 71 | None |
Why the FHSA usually wins for home buyers
Put $8,000 into an FHSA at a 30% marginal rate and you get about $2,400 back at tax time. The money grows tax free and comes out tax free for your home. A TFSA gives you the tax-free growth but no deduction. Over five years at the maximum, that is a $40,000 down payment fund plus around $12,000 in refunds at a 30% rate. Run your own numbers with the FHSA calculator.
When the TFSA is the better choice
- You may never buy a home. Unused FHSA money can move to your RRSP without using RRSP room, but it is taxed when you withdraw it from the RRSP.
- Your income is low now. The FHSA deduction is worth less. You can still contribute and save the deduction for a higher-income year.
- You need flexibility. TFSA money can be used for anything and the room comes back the next year.
- You no longer qualify. If you owned a home you lived in during this year or the previous four, you cannot open an FHSA.
Best plan: use both
Many buyers fill the FHSA first for the deduction, then add TFSA savings, and can also use the RRSP Home Buyers’ Plan. A couple can each open an FHSA and pool up to $80,000 for one home. More detail: the FHSA explained and FHSA vs RRSP.
- Live prices and sentiment on every ticker page
- Weekly email with your watchlist movers
- Price alerts on the stocks and coins you follow
Frequently asked questions
Can I have a TFSA and an FHSA at the same time?
Yes. They have separate limits and you can use both for the same home purchase.
Does FHSA room build up before I open the account?
No. Room starts in the year you open your first FHSA, so opening one early, even with a small amount, starts the clock.
What is the TFSA limit for 2027?
The CRA had not announced it at the time of writing. See TFSA limit 2027 for the latest.
This article is general information, not financial or tax advice.
Leave a Reply