The FHSA — the account that does both things

The First Home Savings Account opened on 1 April 2023, the first genuinely new registered account since the TFSA in 2009. It is unusual because it does something neither of the others does.

Both benefits at once

An RRSP gives you a deduction now and taxes the withdrawal later. A TFSA gives no deduction and taxes nothing later. You pick one.

An FHSA gives both: contributions are deductible from income, and a qualifying withdrawal for a first home is entirely tax-free. Nothing is repaid, unlike the Home Buyers’ Plan, where an RRSP withdrawal must be put back over fifteen years.

That combination is why it is worth using ahead of either of the others, if you qualify.

The shape of it

• Annual and lifetime contribution limits apply, and unused annual room carries forward within limits.
• Participation is time-limited: the account has a maximum lifespan from the year it is first opened, and cannot simply be left indefinitely.
• If you never buy a home, the balance can generally be transferred to an RRSP or RRIF without using RRSP contribution room — so the deduction is not lost, it becomes deferral instead.
• Eligibility turns on being a first-time home buyer, defined by not having lived in a home you or your spouse owned in the current year or the preceding four.

Because the limits and the lifespan are the parts most likely to change, check them against the CRA rather than against any article, including this one.

The trap for dividend investors

Here is the part specific to this site, and it is the same trap a TFSA has.

The FHSA is not covered by the Canada–US tax treaty exemption. That exemption reaches RRSPs and RRIFs, and nothing else.

So a US dividend payer held in an FHSA has 15% withheld at source, and because no Canadian tax is payable on income inside the account, there is nothing to claim a foreign tax credit against. The withholding is unrecoverable.

Same for dividends from any other foreign country, at whatever that treaty’s rate is.

The practical implication: an FHSA is a poor home for foreign dividend payers, and a fine one for Canadian ones or for growth. That is the same ordering a TFSA follows, for the same reason.

And the trap a TFSA has that this shares

Contribution room is consumed when you contribute, not when you profit. A loss inside an FHSA is permanent — the room does not come back, and the capital loss cannot be claimed against gains elsewhere, because nothing inside the account has tax consequences in either direction.

For an account with a short horizon and a specific purpose, that argues against volatility more strongly than it would in a TFSA. The money has a job and a date.

Where it sits against the others

	Deduction in	Tax-free out	US treaty exemption
RRSP / RRIF	Yes	No	Yes
TFSA	No	Yes	No
FHSA	Yes	Yes	No

The FHSA wins the first two columns and loses the third — which only matters if you put foreign dividends in it.

Where to go next

• TFSA vs RRSP for dividends
• Foreign withholding tax beyond the US
• First Home Savings Account opens to Canadians