Market values usually go up and down. But what can you do when these values drop a lot? Consider staying invested. Here’s why.
FHSA benefits
April 01, 2026
By Sun Life Staff
Buying a home for the first time and considering an FHSA? Here are a few FHSA benefits that you should know about.
Key takeaways
- FHSA contributions may reduce your income that is taxed
- Your savings can grow without being taxed each year
- Qualifying withdrawals don’t require repayment
- The account offers structure and flexibility for different timelines
Home prices are high. Rent and everyday expenses continue to rise. Many Canadians are balancing rent, daily expenses, retirement and emergency funds – while trying to prepare for a future home purchase.
It’s not always clear:
- Where should your money go first?
- How much should you save?
- What account makes the most sense?
A First Home Savings Account (FHSA) is designed to focus on one specific goal: your first home. It’s a registered savings plan designed to help eligible Canadians build a down payment in a structured, tax-efficient way. It combines features of both an RRSP and a TFSA, but it’s built specifically for first-time home buyers.
Key features of an FHSA at-a-glance
Here are the key features of an FHSA:
| Feature | FHSA |
|---|---|
| Annual contribution limit | $8,000 |
| Lifetime contribution limit | $40,000 |
| Contributions may reduce taxable income | Yes |
| Growth taxed each year? | No |
| Qualifying home withdrawals taxed? | No |
| Repayment required? | No |
| Maximum time account can stay open | 15 years |
The $40,000 lifetime limit applies to contributions only. Investment growth inside the account isn’t capped.
What are the benefits of an FHSA?
An FHSA offers four core advantages.
1. Contributions may reduce your income that is taxed
When you contribute to an FHSA, the amount may reduce your taxable income for that year.
This reduces income taxed at your highest tax bracket.
Example: Estimated tax impact
Assume an income of ~$75,000, where marginal tax rates in many provinces and territories combined with the federal rates fall between ~28%-33%.
| Contribution | Estimated tax savings |
|---|---|
| $1,000 | ~$280 - $330 |
| $5,000 | ~$1,400 - $1,650 |
| $8,000 (annual max) | ~$2,240 - $2,640 |
Illustrative only. Actual tax savings depend on income and province or territory.
You don’t need to contribute the full $8,000 to potentially see an impact.
2. Savings can grow without being taxed each year
Money inside an FHSA (including interest, dividends, and capital gains) isn’t taxed annually while it remains in the account. This means more of your growth stays invested.
Qualifying withdrawals for a first home can also be tax-free.
Steady saving over time:
Assumptions:
- $5,000 contributed at the beginning of each year
- 5% annual return
- 8 years of saving
- Total lifetime contributions = $40,000
| Year | Total contributed | Estimated value at year-end |
|---|---|---|
| 1 | $5,000 | $5,250 |
| 3 | $15,000 | $16,551 |
| 5 | $25,000 | $29,010 |
| 8 | $40,000 | $50,133 |
Illustrative purposes only. Results depend on contribution timing and investment performance.
After 8 years:
Contributions: $40,000
Estimated growth: ~$10,133
Because growth isn’t taxed annually, it remains invested and continues compounding.
3. Qualifying withdrawals don’t require repayment
Unlike the RRSP’s Home Buyers’ Plan:
- FHSA withdrawals for qualifying homes do not need to be repaid
- There’s no repayment schedule
4. The rules provide structure and flexibility
An FHSA supports different timelines.
You can:
- Contribute gradually
- Carry forward unused contribution room (subject to rules)
- Keep the account open for up to 15 years
If you decide not to buy a home, unused funds may be transferable to an RRSP or Registered Retirement Income Fund (RRIF) (within limits), without triggering immediate tax.
If you’re wondering how that works, read: What happens to your FHSA if you don’t buy a home?
Is an FHSA worth considering for you?
An FHSA may be worth exploring if:
- You plan to buy your first home in the future
- You have room to contribute up to $8,000 per year
- You want to separate your home savings from other goals
- You’re comparing the FHSA with the RRSP Home Buyers’ Plan
If you’re unsure how it fits alongside your TFSA or RRSP, speaking with an advisor can help you weigh the options.
Common questions people have about opening an FHSA
What if I’m not ready to buy soon?
You can keep the account open for up to 15 years.
What if I don’t use it?
Unused funds may be transferred to an RRSP or RRIF (within limits).
What if my income changes?
Unused contribution room may carry forward (subject to rules).
What if I’m saving for other goals too?
An FHSA can work alongside a TFSA or RRSP.
How does an FHSA compare to other registered plans?
If you’re deciding where to save, you may be comparing an FHSA with a TFSA or RRSP.
Contribution rules
| Feature | FHSA | TFSA | RRSP |
|---|---|---|---|
| Annual contribution limit | $8,000 | Annual TFSA dollar limit applies | Annual RRSP dollar limit applies |
| Lifetime contribution limit | $40,000 | No fixed lifetime dollar cap (annual limits apply) | No fixed lifetime dollar cap (annual limits apply) |
| Do contributions reduce taxable income? | Yes | No | Yes |
Home purchase access
| Feature | FHSA | TFSA | RRSP |
|---|---|---|---|
| Home withdrawal limit | Contributions + growth | No specific dollar cap | Up to $60,000 per eligible withdrawal |
| Repayment required? | No | No | Yes (over 15 years) |
| Can be reused for future home purchase? | Generally, no | Yes | Possible if fully repaid and re-qualified |
For RRSPs, the $60,000 limit applies only to withdrawals under the Home Buyers’ Plan – not total RRSP savings.
When each account may make sense
| Account | Best suited for |
|---|---|
| FHSA | Saving for a first home |
| TFSA | Flexible short- and medium-term goals |
| RRSP | Long-term retirement savings |
Many Canadians use more than one account at the same time.
If you’re balancing both a home purchase and retirement savings, you may want to explore: How to balance saving for a home and retirement.
You can also compare:
When an advisor can help you feel more confident about your plan
Saving for your first home can feel exciting – and uncertain at the same time.
You might be wondering:
- Am I saving enough?
- Should I prioritize my FHSA over my TFSA or RRSP?
- What happens if my timeline changes?
- How do I balance saving for a home with everything else?
An FHSA has clear rules. But applying those rules to your income, goals, and timing can feel less clear.
An advisor can help you:
- Understand how much you might want to contribute each year
- Compare the FHSA with other accounts you already have
- Map out a realistic savings timeline
- Make adjustments as your plans evolve
You don’t need to have everything figured out before you speak to someone. If you’d like to talk through your options, you can connect with a Sun Life advisor.
Having a clear savings plan can help make the goal of owning your first home feel more manageable.
Enter your postal code to find an advisor near you.
This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.
