The Two Ways to Buy Your First Home Tax-Free
Canada offers two programs for first-time home buyers. Most people use one or the other. Smart buyers use both — for up to $75,000 per person ($150,000 for a couple).
First Home Savings Account (FHSA)
●Contribute up to $8,000/year (lifetime max $40,000)
●Tax-deductible — contributions reduce your taxable income (like an RRSP)
●Tax-free growth — investments grow without tax (like a TFSA)
●Tax-free withdrawal — when used for a home purchase, no tax on withdrawal
●Must be a first-time buyer (haven't owned a home in the current year or the previous 4 calendar years)
●Account must be open for at least 1 year before withdrawal
●Must be 18+ and under 71
Home Buyers' Plan (HBP)
●Withdraw up to $35,000 from your RRSP tax-free
●Must repay over 15 years (starting the 2nd year after withdrawal)
●Must be a first-time buyer
●The home must be your primary residence
●Must have the funds in your RRSP for at least 90 days before withdrawal
Why Use Both?
●FHSA: $40,000 lifetime — never needs to be repaid, tax-deductible going in, tax-free coming out
●HBP: $35,000 from your RRSP — must be repaid over 15 years
●Combined: $75,000 per person, $150,000 per couple
Strategy Based on Your Income
Income under $50,000: Open FHSA immediately. Contribute the maximum $8,000/year. You may want to carry forward the tax deduction to a year when you're in a higher bracket.
Income $50,000-$100,000: Max out FHSA ($8,000/year) and claim the deduction immediately. Start building your RRSP for HBP withdrawal. Open the FHSA now even if you're not buying soon — the 1-year minimum starts from when you open it.
Income over $100,000: Max out FHSA and claim deduction in your current high bracket. Load your RRSP for a full $35,000 HBP withdrawal. The combined strategy could save you $15,000+ in taxes.
Common Mistakes
●Not opening FHSA early enough — The 1-year minimum means if you find a home today, you can't use FHSA money until next year. Open it now.
●Not understanding HBP repayment — If you don't repay 1/15th each year, that amount is added to your taxable income. Set up automatic contributions.
●Forgetting carry-forward — If you contribute less than $8,000 to your FHSA in a year, you can carry forward up to $8,000 to the next year (max $16,000 contribution in a single year).
How FundGap Can Help
Our $29.99 FHSA application guide gives you a personalized contribution strategy based on your income, a timeline for combining FHSA + HBP, exactly where to open each account, and the tax line numbers for claiming deductions.