What to know
- The FHSA allows first-time homebuyers to save toward a home with both tax-deductible contributions and tax-free withdrawals, making it unique among Canadian savings accounts.
- Although the account’s $40,000 lifetime contribution limit is well below a typical Toronto down payment, one expert says the tax advantages can still make it a valuable savings tool.
- Higher-income earners may benefit the most because FHSA contributions can generate larger tax deductions while helping buyers save over several years.
- If contributors ultimately decide not to purchase a home, FHSA funds can generally be transferred into an RRSP without triggering immediate taxes.
- Experts recommend opening an FHSA as early as possible, contributing consistently, adjusting investments as a purchase date approaches, and seeking advice from financial professionals.
It has now been three years since the First-Home Savings Account (FHSA) was introduced in Canada, but is it still a good investment in 2026?
The FHSA was first launched in Canada back in April 1, 2023, and quickly became popular at the time, especially among young buyers, allowing them to invest towards their first home tax free.
However, with home prices skyrocketing in the GTA and interest in homebuying declining, does it still make sense to invest in one?
Now Toronto spoke with Brittany Kostov, Senior Director of Sales and Agent Programs at Zoocasa to find out whether opening an FHSA is still beneficial to young homebuyers in 2026.
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What makes the FHSA different from other savings accounts?
An FHSA is a plan that allows first-time homebuyers to save towards their first home free of tax. In some ways, this account combines the advantages of other saving plans, such as the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP), since it is tax free and tax deductible.
According to Kostov, this account is usually compared with the other two mentioned, since it includes similar benefits. However, while the FHSA is focused on home savings, other accounts are usually recommended for other kinds of savings.
For instance, she explains that a TFSA is an all-purpose savings and investments plan, which she says are ideal for emergencies, travel, and investments in general, as withdrawing from the account is free, regardless of its purpose. In contrast, withdrawing from the FHSA is only tax-free if the funds go towards housing.
Meanwhile, the RRSP is mainly used for retirement savings. This one can also be used for homebuying, but its withdrawals need to be repaid on a set schedule to maintain the tax-free status, whereas the FHSA doesn’t require a payback if funds are used for housing.
The FHSA also comes with certain limitations. For instance, contributors can only contribute up to $8,000 per year and a lifetime maximum of $40,000. In addition, the account can only be used for 15 years of its opening date, and must be closed after this period.
Is it worth investing in it despite the limits?
While users can only contribute a maximum of $40,000 to the FHSA, the average home selling price in the GTA in May was $1,069,700, according to the Toronto Region Real Estate Board (TRREB). With this average price, a 20 per cent down payment would be $213,940, which is way below the FHSA limit.
In these conditions, is contributing to this account still advantageous for buyers?
As explained by Kostov, whether an FHSA is ideal for a buyer or not depends on their financial goals, and can vary from person to person. However, even as the account’s limits are well under the average downpayment, the FHSA still comes with strategic advantages for Torontonians.
Firstly, the expert explained that the account can be highly beneficial for those in higher tax brackets, since the account offers them the opportunity to receive a deductible.
“Why they might be important for Torontonians is [because] the tax savings are bigger. And the reason being there’s higher incomes in the expensive cities, which means a higher marginal rate. So, the same $8,000 deduction puts more dollars back in their pocket, and it also fits the timeline,” she said.
In addition, the timeline for the account fits the homebuying timeline of most city residents. As explained by Kostov, most Toronto buyers are expected to save for about five to eight years in order to put a down payment on. In that case, the 15-year timeline for the FHSA actually fits their timeline.
Finally, the expert said the fact that the FHSA is “double tax free” including a tax deduction and tax-free characteristic, also makes it very advantageous for any contributors.
“No other account is both tax deductible on the way in and then tax free on the way out for a home purchase. So, the bigger your balance grows, the more that shelter is worth,” she added.
What if contributors don’t want to buy a home?
In the last year, home sales have been declining across the country, with buyers refraining from jumping in despite prices dropping. According to the TRREB, in May, for example, sales were down 6.7 per cent compared to last year.
If interest in home buying is declining, should Torontonians still invest in an FHSA?
As mentioned by Kostov, there are many advantages to the FHSA, and those advantages apply even if the contributor ends up not buying a home.
To determine whether the FHSA is recommended for them, buyers should speak to their financial advisor and mortgage broker, who is able to explain which tax bracket they fit in and determine whether the account is compatible with their financial situation and goals.
However, if they do open an FHSA and end up not using their savings towards a down payment, that money doesn’t go to waste.
Kostov said contributors are able to roll over their FHSA investments into their RRSP within the 15-year window of the account. Doing that saves contributors from immediately being taxed on those savings, and keeps the money from going to waste.
Tips for those opening an FHSA
For those looking to open their FHSA, Kostov says opening as soon as possible could make a difference, even if the contributor initially is only able to put small amounts into the account.
To open an FHSA, contributors must be at least 18 years old, a Canadian resident, a first-time buyer, and have a valid Social Insurance Number (SIN).
“If you start the 15 year clock and then unlock the contribution room as soon as you’re eligible, then you can automate whatever you can afford toward that $8,000 per year limit,” she said.
Her second piece of advice would be for contributors to match their investments to the timeline, and move their savings into other accounts as needed.
“For example, as your expected purchase date gets closer, you could move things into cash-like products, like bonds or GICs,” she said.
Her final advice is for contributors to diversify their investments into different accounts, such as the TFSA and RRSP, depending on what is most efficient for them.
“Speak to your financial advisor, your account, your mortgage broker, because depending on your goals and your situation, where you fit in those different tax brackets, [the FHSA] could be more advantageous, or it might actually…potentially reduce the interest there,” Kostov added.
