If you’re saving for your first home in Canada, two government programs offer significant tax advantages that can accelerate your down payment timeline dramatically: the First Home Savings Account (FHSA) and the RRSP Home Buyers’ Plan (HBP). Together, they can provide a combined tax deduction worth thousands of dollars annually while building your down payment. Here’s exactly how to maximize both in 2026.
Program Comparison at a Glance
| Feature | FHSA | RRSP HBP |
|---|---|---|
| Annual contribution limit | $8,000 | Based on existing RRSP balance |
| Lifetime limit | $40,000 | $35,000 withdrawal per person |
| Contribution tax deductible? | Yes — deducted from income | Yes — when originally contributed |
| Withdrawal tax-free? | Yes — for qualifying home purchase | Yes — but must repay over 15 years |
| Investment growth taxed? | No — tax-free growth | Tax-deferred (taxed at repayment) |
| Unused funds | Transfer to RRSP if home not purchased | Remains in RRSP for retirement |
| Carry-forward | Yes — up to $8,000 from prior year | No carryforward on HBP withdrawal |
The FHSA: The Most Powerful New Tax Account in Decades
The FHSA, introduced in 2023, is a genuinely exceptional tax vehicle — combining the deductibility of an RRSP with the tax-free withdrawal of a TFSA, specifically for first home purchases. Key rules in 2026:
- Open an FHSA and contribute $8,000 before December 31 — even if you only deposit $1, the full $8,000 room is preserved for the year.
- Unused annual room carries forward by one year only — maximum $16,000 contribution in a single year (current + prior year carryforward).
- The FHSA must have been open at least one calendar year before you can use it for a qualifying purchase.
- If you never buy a home, FHSA funds transfer to your RRSP without using contribution room — making it an excellent retirement savings account regardless.
Combined Power: Using Both in 2026
A couple, each with a full FHSA and RRSP HBP eligibility, can combine:
| Program | Per Person | Couple Total |
|---|---|---|
| FHSA (lifetime max) | $40,000 | $80,000 |
| RRSP HBP (withdrawal max) | $35,000 | $70,000 |
| Combined Maximum | $75,000 | $150,000 |
Tax Savings: How Much Does Contributing $8,000 to FHSA Actually Save?
| Income | Marginal Tax Rate (ON) | Tax Refund on $8,000 FHSA |
|---|---|---|
| $60,000 | ~31.5% | ~$2,520 |
| $90,000 | ~43.4% | ~$3,472 |
| $120,000 | ~46.4% | ~$3,712 |
Ready to put your savings to work? See today’s first-time buyer mortgage rates at mrates.ca — updated daily for Ontario buyers.