FHSA vs TFSA for a Down Payment

1. The Short Answer: FHSA or TFSA for a House?

If you qualify, the FHSA usually comes first. The FHSA is the only registered account that gives you a deduction going in and tax-free money coming out for a home with nothing to repay. A TFSA gives tax-free money coming out, but no deduction going in. For the same $8,000 saved, the FHSA hands back a refund that the TFSA does not.

The TFSA wins on freedom. TFSA money can pay for a home, a car, a wedding or an emergency without tax, and whatever you withdraw comes back as new room on January 1 of the next year. FHSA money is tax-free only for a qualifying first home; anything else is taxed as income.

You do not have to choose. Most first-time buyers can hold both. The FHSA takes $8,000 a year; the TFSA takes $7,000 for 2026 plus any room carried forward. Section 10 sets out the order many buyers use, and section 9 shows how to move TFSA savings into an FHSA to pick up the deduction.

When the TFSA alone makes sense. If you fail the first-time buyer test (you lived in a home you or your current spouse or partner owned in the current year or the previous four calendar years), you cannot open an FHSA, and the TFSA becomes the main tax-free account for a down payment. The same is true if you are older than 71 at December 31 of the year you want to open one.

When the FHSA still wins even if buying is unsure. An FHSA you never use for a home can move to an RRSP or RRIF without using any RRSP room. Your deductions stay claimed. That makes the FHSA a low-regret choice for anyone who qualifies, as section 5 explains. If you also hold RRSP savings, our FHSA vs RRSP Home Buyers’ Plan page covers the third option.

2. How the FHSA and the TFSA Work

The FHSA. A First Home Savings Account can be opened by a Canadian resident aged 18 or older (19 where that is the age of majority) who is 71 or younger at December 31 of the opening year and is a first-time home buyer. Room starts only when you open your first FHSA: $8,000 a year, with up to $8,000 of unused room carried forward, and $40,000 over your lifetime. Contributions are deductible, growth is not taxed, and a qualifying withdrawal for a first home is tax-free. Our FHSA guide and FHSA eligibility page cover each rule.

The TFSA. A Tax-Free Savings Account can be opened by a Canadian resident aged 18 or older with a valid social insurance number. Room builds every year from the year you turn 18 whether or not you have an account, and unused room carries forward without limit. Contributions are not deductible, but growth and withdrawals are tax-free, and withdrawals are added back to your room on January 1 of the next year. The TFSA guide explains the account and the TFSA contribution limit page lists every year’s limit.

What a qualifying FHSA withdrawal needs. You must be a first-time buyer at the time of the withdrawal (ignoring the 30 days before it), have a written agreement to buy or build a qualifying home with completion before October 1 of the year after the withdrawal, not have acquired the home more than 30 days before the withdrawal, plan to live in it within one year, and be a resident of Canada. The withdrawal is made with Form RC725.

What a TFSA withdrawal needs. Nothing. You can withdraw any amount at any time for any reason. The only rule to watch is the re-contribution rule in section 4: putting the money back in the same calendar year uses new room.

The short version. The FHSA is deduction in, tax-free out for a home. The TFSA is no deduction in, tax-free out for anything. The RRSP, by comparison, is deduction in, taxable out, which is why the TFSA vs RRSP decision turns on tax rates now and later.

3. The Deduction: What the FHSA Adds That the TFSA Cannot

The deduction is the FHSA’s edge. Every dollar you deduct reduces your taxable income, so the refund equals the tax you would otherwise have paid on that income. The TFSA has no equivalent. For a buyer who fills the FHSA’s $40,000 lifetime limit, the deductions add up to a large, permanent tax saving if the money goes into a qualifying home.

What five years of FHSA deductions are worth. The table shows the total tax saved by deducting $8,000 a year for five years, $40,000 in all, at three income levels. It uses 2026 federal and provincial brackets, basic personal amounts, the Ontario surtax and Health Premium and the Quebec abatement for every year, and ignores other credits. Each figure is five times the one-year saving.

The net cost of an FHSA dollar. At $75,000 of taxable income in Ontario, an $8,000 FHSA contribution produces a $2,522 refund, so it costs $5,478 out of pocket ($8,000 – $2,522). The same $8,000 in a TFSA costs the full $8,000. If both accounts grow at the same rate and the money goes into a qualifying home, the FHSA leaves you $2,522 ahead for every $8,000 contributed.

Timing the deduction. You can deduct an FHSA contribution in the year you make it or carry it forward to a later year, even after the FHSA is closed. If your income is about to rise, contributing now and deducting later gets the money growing tax-free today while saving the deduction for a year when it is worth more.

Use the refund. The refund is extra savings. Putting it into your TFSA, or into next year’s FHSA contribution, compounds the advantage. The FHSA calculator tracks your room, and the tax refund calculator shows the refund for any deduction in your province.

4. Flexibility and Withdrawals

TFSA: any time, any reason. You can take money out of a TFSA whenever you like, tax-free, and spend it on anything. The amount withdrawn is added back to your contribution room on January 1 of the next year, at the same time as the new yearly limit.

The TFSA re-contribution trap. Putting money back into a TFSA in the same calendar year you took it out counts as a new contribution. If you have no room left, it creates an excess taxed at 1% a month on the highest excess in each month, with no grace amount. Example: someone with no room left withdraws $10,000 in March 2026 and puts it back in June 2026. The $10,000 excess costs $100 a month ($10,000 x 1%) for June to December, or $700, until the withdrawal is added back to room on January 1, 2027. A TFSA Return would be due by June 30, 2027. Our TFSA withdrawal rules page covers this in detail.

FHSA: tax-free only for a qualifying home. An FHSA withdrawal that is not a qualifying withdrawal is added to your income for the year. Withdrawals also do not give you room back, because the $40,000 lifetime limit counts what you contributed. An FHSA is a one-way account: in for a home, out for a home.

Fixing an FHSA excess. If you put too much into an FHSA, the excess is taxed at 1% a month on the highest excess until it is removed with a designated withdrawal or transfer on Form RC727, a taxable withdrawal, or new room on January 1.

Life changes. The table shows how each account handles common changes of plan before a purchase.

5. What If You Do Not Buy a Home?

The FHSA has three exits. If you decide not to buy, you can transfer the FHSA directly to an RRSP or RRIF, tax-deferred and without using any RRSP room, as long as you have no excess FHSA amount. You can take a taxable withdrawal instead. Or you can keep contributing until the account must close. What you cannot do is leave it past the end of the maximum participation period: anything left then loses its FHSA status and its fair market value is added to your income.

When the FHSA must close. The maximum participation period ends on December 31 of the year of the earliest of the 15th anniversary of opening your first FHSA, the year you turn 71, or the year after your first qualifying withdrawal. Someone aged 28 who opens an FHSA in 2026 and never buys has until December 31, 2041.

Why the RRSP transfer is valuable. Moving the FHSA to an RRSP keeps every deduction you already claimed and does not touch your RRSP room. In effect, the FHSA gives you up to $40,000 of extra RRSP-style room. The money is then taxed when it eventually comes out of the RRSP or RRIF, usually in retirement.

How it compares with the TFSA. At $75,000 of taxable income in Ontario, each $8,000 FHSA contribution costs $5,478 after its $2,522 refund. If the money later moves to an RRSP and comes out taxed at the same effective rate of 31.525% ($2,522 / $8,000), you keep 68.475% of the balance, exactly what $5,478 in a TFSA would have grown to at the same return ($5,478 / $8,000 = 68.475%). Withdrawn at a lower rate in retirement, the FHSA route comes out ahead; at a higher rate, the TFSA does.

The TFSA has nothing to unwind. TFSA savings that never go into a home simply stay in the account for the next goal, with no deadline and no tax on the way out. That is the TFSA’s main advantage over the FHSA, and the reason it is the better home for money you are genuinely unsure about.

Deductions survive the account. If you contributed to an FHSA but did not deduct the contributions, you can still claim the deduction in a later year, even after the FHSA is closed.

6. Effect on Benefits

The FHSA deduction lowers net income. Because an FHSA deduction reduces your net income, it can increase income-tested family benefits such as the Canada Child Benefit (CCB), which shrinks as adjusted family net income rises. A TFSA contribution has no such effect.

TFSA withdrawals stay out of income. TFSA withdrawals are not taxable, so taking money out does not raise the net income used for benefits. That makes the TFSA a neutral place for families who depend on income-tested benefits.

How much the CCB can rise. For July 2026 to June 2027, the CCB is reduced by 7%, 13.5%, 19% or 23% of adjusted family net income above $38,237 (for one, two, three, or four or more children), with lower add-on rates above $82,847. The table shows the yearly CCB gain from an $8,000 FHSA deduction for four sample families.

Add it to the refund. For the two-child family at $70,000, the CCB gain sits on top of the tax refund. Repeated for five years at these rates, it would add $5,400 ($1,080 x 5), money a TFSA contribution would not produce.

The groceries and essentials benefit. The Canada Groceries and Essentials Benefit replaced the GST/HST credit from the July 2026 payment and starts to shrink above $46,432 of adjusted family net income. Lower-income savers can keep more of it by lowering net income with an FHSA deduction. See our GST/HST credit payment dates page for amounts and dates.

One caution. An FHSA withdrawal that is not a qualifying withdrawal is added to income, which can reduce benefits in that year. A qualifying withdrawal for a home is tax-free and does not.

7. Limits and Room

FHSA room. $8,000 in the year you open your first FHSA and $8,000 each year after, up to $40,000 over your lifetime. Unused room carries forward only up to $8,000, so the most you can contribute in one year is $16,000. Skipping years does not reduce the $40,000 lifetime limit, but it delays reaching it, and the 15-year participation period keeps running.

TFSA room. The 2026 TFSA limit is $7,000. Room builds from the year you turn 18 (or the day you become a resident) whether or not you open an account, and it all carries forward. Someone who was 18 or older and resident every year since 2009 and never contributed has $109,000 of room in 2026. The 2027 limit has not been published yet.

Side by side in 2026. A single first-time buyer who opens an FHSA in 2026 can shelter $8,000 in the FHSA plus at least $7,000 in a TFSA, or $15,000 ($8,000 + $7,000), and more if they have unused TFSA room from earlier years. A couple who both qualify can shelter $30,000 ($15,000 x 2).

Penalties are the same size. Both accounts charge 1% a month on the highest excess amount in each month. Neither has the RRSP’s $2,000 cushion, so please check your room before every contribution. The TFSA contribution room calculator and the FHSA room calculator above do the counting.

8. Special Cases

Newcomers to Canada. TFSA room starts on the day you become a resident, and only years of residency count. You get the full yearly limit in your year of arrival, with no proration, so a 2024 arrival had $7,000 of room that year. An FHSA can be opened once you are a resident and meet the first-time buyer test.

Where the age of majority is 19. In British Columbia, New Brunswick, Newfoundland and Labrador, the Northwest Territories, Nova Scotia, Nunavut and Yukon, you must be 19 to open either account. For the TFSA, the room from the year you turned 18 carries over. For the FHSA, room only starts when you open, so there is nothing to carry over.

Older buyers. You can open an FHSA only if you are 71 or younger at December 31 of the opening year, and the account must close by the end of the year you turn 71. The TFSA has no upper age limit for contributions as long as you are a resident.

Leaving Canada. No new TFSA room builds in years you are a non-resident. Contributions made while non-resident are taxed at 1% a month until withdrawn or until you become a resident again, while withdrawals made as a non-resident are not taxed in Canada. For the FHSA, you must be a resident of Canada to make a qualifying withdrawal.

Living in a partner’s home. The FHSA’s opening test counts a home owned by your current spouse or common-law partner that you lived in during the current year before opening or the previous four calendar years. At each qualifying withdrawal, the first-time buyer test looks at a home you owned and lived in. So the timing of opening an FHSA matters if you plan to move into a home your partner owns. The TFSA does not care where you live.

Former homeowners. Owning a home in the past does not rule out an FHSA if you did not live in a home you owned in the current year or the previous four calendar years. The FHSA eligibility guide walks through the test with examples.

9. Using the FHSA and TFSA Together

Move TFSA savings into the FHSA. If you already have savings in a TFSA and have just opened an FHSA, you can withdraw from the TFSA and contribute to the FHSA. You pick up the FHSA deduction, and the TFSA withdrawal is added back to your TFSA room on January 1 of the next year. Example: moving $8,000 from a TFSA to an FHSA in 2026 at $75,000 of taxable income in Ontario produces a $2,522 refund, and the $8,000 of TFSA room returns on January 1, 2027.

Do not re-contribute the TFSA money in the same year. If you change your mind after moving money out of the TFSA, putting it back before January 1 uses new room and can create an excess. The safest pattern is one move per year, planned in advance.

Put the refund in the TFSA. The FHSA refund arrives after you file. Contributing it to your TFSA keeps it growing tax-free and keeps it available for closing costs, moving or furniture, which are not FHSA expenses.

At the purchase. You can make a qualifying FHSA withdrawal and take money out of your TFSA for the same home. If you also have RRSP savings, the Home Buyers’ Plan lets you add up to $60,000 more per person; our Home Buyers’ Plan guide covers the rules. A couple who both qualify can draw on two FHSAs, two TFSAs and two HBP limits.

The planner below adds up what one buyer or a couple could have for a first home from FHSAs and the Home Buyers’ Plan by a target year, using an assumed return you choose. Add your TFSA balance on top.

10. Order of Use: FHSA vs TFSA When Saving and When Buying

A rule-based order, not advice. The order below follows the tax rules. Your mix depends on your income, how sure you are about buying, and when.

Why the FHSA goes first while saving. It gives a deduction the TFSA cannot, its room only starts once opened, and if you never buy it can still move to an RRSP without using RRSP room. Filling it first captures the deduction without giving up much.

Why the FHSA goes first at the purchase. FHSA money can only come out tax-free for a qualifying home, and the account must close by December 31 of the year after your first qualifying withdrawal. TFSA money stays useful for anything, so it makes sense to draw it last and keep any leftover as a cushion for the costs of owning a home.

When the TFSA goes first. If your purchase is uncertain or far off, or you may need the money for something else, the TFSA’s freedom can matter more than the FHSA’s deduction. The same is true if you do not qualify for an FHSA at all.

11. Down Payment Savings in Canada: Where to Keep the Money

Match the holding to the date. The account decides the tax; what you hold inside it decides the risk. Money you will need within a year or two can lose value in a market drop right before closing if it sits in stocks or equity funds. Many buyers hold short-term down payment money in cash savings or GICs inside the FHSA or TFSA, and invest only money with a longer horizon. The GIC vs high-interest savings account comparison explains the trade-off.

Rates. Our pages on the best high-interest savings accounts and the best GIC rates list current rates, dated. A GIC used for a down payment needs to mature before the closing date unless it is cashable.

Deposit insurance. CDIC insures eligible deposits, including GICs and savings in foreign currency, up to $100,000 per category at each member institution. FHSA deposits and TFSA deposits are separate categories, so a buyer can hold up to $100,000 of insured deposits in each at the same institution.

Investor protection. At an investment dealer, CIPF covers property missing if a member firm fails, not market losses. TFSAs and FHSAs both fall in the general accounts category, which is covered up to $1,000,000 combined with your cash and margin accounts at that firm.

Choosing a provider. Our rankings of the best TFSA accounts and best FHSA accounts compare costs and features, and our Wealthsimple TFSA review, Wealthsimple FHSA review and EQ Bank review look at specific providers. Rankings follow our broker rating methodology, our advertiser disclosure explains how WealthScale is funded, and our editorial standards explain how each figure is checked.

See the growth. The compound interest calculator shows how regular monthly deposits grow at a rate you choose, which helps you test how long a down payment will take.

12. Common FHSA and TFSA Mistakes

Saving for a home only in a TFSA when you qualify for an FHSA. The money comes out tax-free either way, but the TFSA gives up the deduction. At $75,000 of taxable income in Ontario, that is $2,522 for each $8,000 saved.

Waiting to open the FHSA. FHSA room does not build until you open your first account. Unlike the TFSA, there is no room waiting for you from earlier years.

Re-contributing a TFSA withdrawal in the same year. Without spare room, money put back before January 1 is an excess taxed at 1% a month.

Treating the FHSA like a TFSA. FHSA money taken out for anything other than a qualifying home is taxed as income, and the room does not come back.

Over-counting FHSA carry-forward. Only $8,000 of unused FHSA room carries forward. Someone who opened in 2026 and skipped 2026 and 2027 can contribute $16,000 in 2028, not $24,000.

Forgetting the FHSA’s end date. Anything left in an FHSA after the maximum participation period is taxed at its fair market value. Please move it to an RRSP or RRIF, or withdraw it, before December 31 of the final year.

Holding next year’s down payment in stocks. The account shelters tax, not market risk. A drop just before closing can shrink the down payment you were counting on.

Moving in with a homeowner partner before opening an FHSA. Living in a home your current spouse or partner owns can fail the FHSA’s test when you try to open the account. Please check the opening test before the move, not after.