If you're a first-time home buyer saving for a down payment in 2026, you may be wondering whether to prioritize your First Home Savings Account (FHSA) or continue maxing out your RRSP. The short answer is: the FHSA often makes more sense for first-time buyers because it combines tax deductions with tax-free growth and tax-free withdrawals specifically for a home purchase, whereas RRSP withdrawals are fully taxable. However, your best choice depends on your income, timeline, and how much you can afford to save. The FHSA is relatively new (launched in 2023), and many Canadian savers haven't yet considered how it changes the traditional RRSP-first strategy. Let's break down the key differences and help you decide which account should get your money first. For decades, maximizing your RRSP was the go-to strategy for reducing taxable income. The FHSA flips the script for first-time home buyers. Here's why: RRSP: You get a tax deduction on contributions, but withdrawals for any reason (including down payments) are fully taxed as income. If you withdraw $30,000 from your RRSP, you must claim the full $30,000 as income in that year.
No. FHSA withdrawals used to buy your first home are permanent and tax-free. You do not repay them like you do with the RRSP Home Buyers' Plan (HBP). This is one of the major advantages of the FHSA.
Yes, you can contribute to both accounts in the same year if you have the money and available contribution room. However, if your savings are limited, prioritizing FHSA first (for home buyers) generally offers better tax efficiency.
The FHSA annual limit is indexed to inflation and rounded to the nearest $500. For 2024, it was $8,000; for 2025, it increased to $8,500. Check the CRA website for the 2026 limit closer to that year.
You owe tax on the full amount withdrawn at your marginal tax rate. For example, a $25,000 RRSP withdrawal in Ontario could result in approximately $6,250 in tax owed. The FHSA avoids this tax cost entirely.
The FHSA is only for first-time home buyers. If you owned a home in the past, you may not be eligible unless significant time has passed and you meet the CRA's definition of a first-time buyer. Check the CRA website for the specific eligibility rules.