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  • Brett Watt

Tax-Free First Home Savings Account

The Canadian government recently introduced the First Home Savings Account, a new savings tool designed to help Canadians save for their first home. The account is aimed at making it easier for first-time homebuyers to save for a down payment by providing a tax-free savings option with several unique features. In this blog post, we'll take a closer look at the First Home Savings Account, including how it works, the securities it can hold, and the pros and cons of opening one. We will also tell you about why it can be used for more than just purchasing a home.

How does the First Home Savings Account work?

The First Home Savings Account is a registered account with the Canadian government, which means that it is eligible for special tax treatment. Specifically, any interest or investment gains earned within the account are tax-free, and contributions to the account are tax-deductible, like the RRSP. You can also transfer existing assets from your RRSP to your FHSA, however, there will be no tax consequences to doing so.

The account has an annual contribution limit of $8,000, and any unused contribution room can be carried forward. Additionally, if you maximize your annual contribution each year, you can potentially save up to $40,000 over five years toward your down payment. The table below provides an example of how your savings could add up if you maximize your contribution each year:

It's important to note that any withdrawals from the account will have the following tax consequences:

1. Qualified home purchase- tax-free withdrawal

2. Transferring to an RRSP (uses RRSP contribution room) - no tax consequences.

3. Withdrawal for any other reason – taxable

What securities can you hold in the account?

The First Home Savings Account can hold a variety of securities, including:

  • Savings accounts

  • Guaranteed Investment Certificates (GICs)

  • Mutual funds

  • Exchange-traded funds (ETFs)

  • Stocks

  • Bonds

What are the pros and cons of the First Home Savings Account?


  • Tax-free savings: Any interest or investment gains earned within the account are tax-free, which can help you save more towards your down payment.

  • Tax deductible contribution

  • Can use to grow retirement savings if you do not purchase a home.

  • You can combine an FHSA withdrawal with the Home Buyers Plan from an RRSP to create a down payment of $75,000 + per spouse.

  • Flexible contribution options: You can contribute as much or as little as you like, up to the annual contribution limit.


  • Restricted use of funds as outlined above.

  • Limited to individuals who qualify as first-time home buyers.


The First Home Savings Account is a new savings tool that can help Canadians save for their first home or grow their retirement nest egg if they never plan to purchase a home. The new plan combines the benefits of an RRSP and TFSA into one. It can also be a great tool for families who have first-time home buyers and want to help their kids or grand kids to save money tax efficiently.

Open an FHSA as soon as possible since the participation room only builds up once an account is open.

For more details on the FHSA, please find the Canada Revenue Agency’s webpages on the topic, here.

This is not an official publication of Manulife Securities. The views, opinions, and recommendations are those of the author alone and they may not necessarily be those of Manulife Securities. This publication is not an offer to sell or a solicitation of an offer to buy any securities. This publication is not meant to provide legal, accounting or account advice. As each situation is different, you should seek advice based on your specific circumstances. Please call to arrange for an appointment. The information contained herein was obtained from sources believed to be reliable; however, no

representation or warranty, express or implied, is made by the writer, Manulife Securities, or any other person as to its accuracy, completeness or correctness.

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