Essential FHSA Facts: What Every First-Time Homebuyer Should Know

Even with high prices and limited supply, homeownership is still the dream for most Canadians. Making that dream a reality, however, takes hard work, discipline, and a smart way to save.

Launched in 2023, the First Home Savings Account (FHSA) is the latest registered account offering from the federal government as it seeks to address the housing affordability crisis. FHSAs offer Canadian residents a way to save for their first home—whether they are buying or building—by putting their funds in a dedicated, tax-free savings account. Statistics Canada tax filing data released in 2025 showed that nearly half a million Canadians opened an FHSA in its debut year.

Leveraging an FHSA may help accelerate your savings and make your homeownership dreams a reality. Are you a first-time homebuyer wondering if an FHSA is right for you? Read on to learn more about how this savings account compares to other registered accounts—and how private alternatives within your FHSA, like real estate investment trusts (REITs) and renewable infrastructure funds, could help you save more.

Who can open an FHSA?

Unlike Tax-Free Savings Accounts (TFSAs), Registered Education Savings Plans (RESPs), and Registered Retirement Savings Plans (RRSPs), FHSAs are exclusively available to first-time homebuyers residing in Canada. To qualify as a first-time homebuyer and open an FHSA, you—and, if applicable, your spouse or common-law partner—must not have owned or co-owned a home anywhere in the world in the four years leading up to opening the account. It’s important to note that you must be a resident of Canada between the ages of 18-71 both at the time of application and when you decide to withdraw the funds to purchase or build your home. FHSAs may remain open for a maximum of 15 years.

How do FHSAs work?

Aspiring first-time homeowners can contribute up to $8,000 per year to their FHSA, which shelters that amount of their income from taxes. For example, if you make $100,000 per year and contribute the annual maximum, your taxable income drops to $92,000. The lifetime FHSA contribution limit is $40,000, but as with RRSPs, contribution limits can be carried over to the following year. If you only save $5,000 in the first year, for example, you’re eligible to save $11,000 the following year. The accounts can hold cash savings or qualified investments, including real estate investment trusts (REITs). The advantage of including investments in your account vs. cash is that they have the potential to generate income within your FHSA, accelerating how quickly you may be able to save.

Can more than one person in a household open an FHSA?

Any qualifying individual—whether single, married, or common-law—is eligible to open their own FHSA. While any party can contribute to the account, the FHSA tax deduction is limited to a maximum of $8,000 per year, per person. For example, if you contribute $8,000 to your own account and $2,000 to your partner’s account, you are still only able to claim $8,000 on your own tax return.

FHSA vs. TFSA

In contrast to a TFSA, funds saved in an FHSA are strictly designated for purchasing or building your first home. While this requirement may be beneficial by keeping savings focused on a specific goal, it also limits flexibility, as funds can’t be accessed tax-free for other uses. Be careful not to over contribute: if your account exceeds the annual $8,000 limit or the lifetime maximum of $40,000, a 1% monthly tax will apply until the balance returns to these limits. Any extra funds initially transferred from an RRSP must also be moved back. Ultimately, diligent management of your FHSA balance allows you to maximize tax-sheltered savings without incurring penalties.

FHSA vs. RRSP

Since the early 1990s, RRSPs have also been a way for Canadian residents to access their existing savings for down payments, tax-free. Unlike the FHSA, there are no limits on who can open an RRSP in Canada, provided you are a resident of Canada between the ages of 18 and 71. Anyone buying a home in Canada—whether it’s your first or your last—is eligible to borrow up to $60,000 from their RRSP through the Home Buyers’ Plan. These funds need to be replaced within 15 years, however, or they will be counted as income. With an FHSA there is no need for repayment. Additionally, while the Home Buyers’ Plan has a 90-day minimum holding period before you withdraw, there is no holding period for FHSAs.

Key tax advantages of FHSAs

FHSAs combine the tax benefits of RRSPs and TFSAs in one ultra-tax-efficient account. Like an RRSP, contributions to your FHSA are tax-deductible—and like a TFSA, withdrawals (including any potential investment growth) are completely tax-free if they’re used toward purchasing or building your first home. This combination of tax advantages is unique to the FHSA and can provide you with significant tax savings.

FHSAs also provide a rare and valuable opportunity to limit tax liability: they allow you the option to delay claiming your tax deduction until an optimal time. You can contribute to an FHSA when you’re in a low tax bracket (e.g., if you’re just starting your career with a lower salary), but you do not have to claim the deduction at that time. Instead, you can choose to wait and claim the deduction in a future year when you’re earning more and therefore in a higher tax bracket.

This same tax-efficient approach can extend to investments in alternative assets such as REITs or renewable infrastructure funds, which can generate tax-advantaged income or capital gains while your FHSA grows.

Tax implications of early FHSA withdrawals

If you decide to make a withdrawal for any reason outside of purchasing or building a home or removing excess funds from the account to avoid the 1% tax penalty, you will be subject to an FHSA withholding tax. Like RRSP withdrawals, the amount is taxed both at the time of withdrawal and upon income tax filing.

When you are withdrawing funds for your first home, timing is key. You must demonstrate that you or your partner have not acquired the home more than 30 days immediately before or after the withdrawal. The account can remain open for up to 15 years (or until the age of 71) and if you do not buy a home during this time, the unused savings can either be transferred into an RRSP tax-free or withdrawn as taxable income.

Can FHSAs, RRSPs, and TFSAs be used at the same time?

Provided you meet the criteria for opening these accounts, there is no barrier to using all three as savings vehicles for your first home. For example, if you are a first-time buyer, you could combine funds borrowed from your RRSP, withdrawn from your TFSA, and released from your FHSA to contribute to your down payment.

Gifting FHSA funds to your children or grandchildren

While you can’t open an FHSA on behalf of a child or grandchild, you can still make a significant contribution to help them save toward a down payment. Parents and grandparents can gift funds for a child or grandchild to use toward their own FHSA—up to the $8,000 annual contribution limit.

There are no immediate tax consequences to gifting funds to your child or grandchild for their FHSA, as investment income earned inside the FHSA is not taxed back to you, the giver. Once the funds are in the FHSA, the account holder (your child or grandchild) is entitled to claim the tax deduction for the contributions.

It’s important to note that your child or grandchild can choose between using the deduction in the year they make the contribution or deferring it to a future year when they expect to be in a higher tax bracket. This approach can be a tax-efficient way to build generational wealth and support the next generation’s homeownership goals.

Optimizing your portfolio growth through private alternative investments

When deciding how to grow your FHSA, it’s wise to think beyond minimal-interest savings and aim for steady, reliable growth. Investing in alternatives like private REITs can be an ideal strategy, especially given the shorter-term horizon of FHSAs. Unlike stocks, which fluctuate with market highs and lows, private REITs can offer a stable foundation by directly tying returns to the market value and rental income of tangible properties.

Private REITs not only diversify your portfolio but also help manage risk and foster long-term financial stability, which can get your FHSA working harder for you. If you’re looking for even more ways to diversify, consider private funds in areas like renewable infrastructure—an exciting and sustainable addition to your investment strategy.

Housing affordability remains challenging for many Canadians due to numerous factors, including pricing outpacing wage growth, limited supply of lower-priced homes, and new development project cancellations. Saving is hard work, but registered accounts like FHSAs are a great place to hold investments and create tax efficiencies in 2025/2026 to get you one step closer to your dream home.

Skyline offers many private alternative investments that may support you reaching your FHSA savings goals sooner. These investments, which specialize in real estate and renewable infrastructure, have a proven track record of resilience amid market uncertainty and have provided a historical annualized return of 8-14%.¹ Investing with Skyline may help you accelerate savings not only in your FHSA, but also in your RRSP, RESP, or TFSA.

¹ The performance quoted represents since inception. Full annualized return performance is as follows: Skyline Apartment REIT, 7.48% 1-year, 8.12% 3-year, 11.38% 5-year, 14.18% 10-year, 13.40% inception (June 1, 2006); Skyline Industrial REIT, 4.60% 1-year, 5.20% 3-year, 16.23% 5-year, 15.79% 10-year, 14.03% inception (January 10, 2012); Skyline Retail REIT, 8.26% 1-year, 7.76% 3-year, 10.18% 5-year, 12.34% 10-year, 11.68% inception (October 8, 2013); Skyline Clean Energy Fund, 9.01% 1-year, 9.16% 3-year, 9.26% 5-year, and 8.94% inception (May 3, 2018). Performance is for Class A of the funds and does not guarantee future results for Class F. All Skyline REIT’s figures as at September 30, 2025. Skyline Clean Energy Fund’s figures as at October 1, 2025.