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The First Home Savings Account (FHSA) is a new registered investment plan that early career physicians should consider when saving for their first home.

A version of this story appeared on The Inspired Investor on March 22, 2023.

If you’re looking for a tax-efficient way to save toward the purchase of a home, then the FHSA may be the right savings tool for you. And if you don’t end up buying or building a qualifying home, you can still direct the funds toward your retirement, or help your young adult children or grandchildren save for their first home.

While Tax-Free Savings Accounts (TFSAs), Registered Retirement Savings Plans (RRSPs) and FHSAs all offer tax benefits, knowing some key differences may help you choose which plan(s) fits your goals.

Below, you’ll find answers to some of the top questions about the features and tax treatments of each plan, plus contribution and withdrawal considerations.

What is it?A registered plan where your investment earnings and withdrawals are tax-free Explore TFSAsA registered plan where your contributions are tax-deductible (up to your personal deduction limit) and investment earnings are tax-deferred Explore RRSPsA new registered plan designed to help first-time homebuyers. Your contributions are tax-deductible, and investment earnings and withdrawals are tax-free if used to purchase your first home. Explore FHSAs
Who can open one?Canadian residents with a Social Insurance Number (SIN) who are at least 18 or 19 (or the age of majority in your province)Canadian residents with a Social Insurance Number (SIN) who are under age 71, have earned income and file a tax return in CanadaCanadian residents with a Social Insurance Number (SIN) who are at least age 18 (and no less than the age of majority in your province) and under age 71, and you and/or your spouse or common-law partner have not owned a home where you lived in the current calendar year or at any time in the preceding four calendar years
Are contributions tax-deductible?NoYes (up to your personal deduction limit)Yes (up to the annual and lifetime limits)
Do my savings grow tax-free or tax-deferred?Tax-freeTax-deferred — you’re charged taxes when you withdraw funds Withdrawals are added to taxable income the year you take the money out; a withholding tax will also apply to early withdrawalsTax-free as long as you use funds for a qualifying first home
How much can I contribute each year?$6,500 for 2023, plus your unused contribution room and any amounts you’ve withdrawn from previous years18% of the previous year’s earned income, less any pension adjustment, up to a maximum annual limit ($30,780 for 2023)$8,000 annually, plus up to $8,000 of your unused contribution room, up to a maximum lifetime limit of $40,000


You’ll see that the FHSA combines the tax advantages of an RRSP and a TFSA. And when it comes to taxes, this is a big deal.

Like an RRSP, contributions to an FHSA are tax-deductible. So, if you contribute $8,000 you can deduct the same amount from your taxable earnings. You can use the deduction in the year you contribute or carry it forward to a later year, which may be useful for medical residents who will be in a higher tax bracket after they complete their full residency.

First Home Savings Account (FHSA): a tax-free way to save for your first home

  • $8,000: Annual tax-deduction FHSA contribution limit
  • $40,000: Lifetime FHSA contribution limit
  • $0: How much you’ll pay in taxes on your FHSA earnings

If you are making a qualifying withdrawal, you won’t pay tax on that withdrawal. Like a TFSA, this includes principal and potential growth. (All withdrawals from an RRSP are subject to income tax.) If you are making a non-qualifying withdrawal, then you would pay income tax on the principal and potential growth, just like an RRSP withdrawal.

There isn’t a one-size-fits-all answer in deciding how you want to save. It’s a personal decision you should make based on your goals, circumstances, tax rates and personal habits.

Visit Compare TFSA vs. RRSP vs. FHSA for more answers, including information on the types of investments that can be held in each account.