FHSA vs TFSA for a Down Payment: Which One Wins? (It's Not Close)
By Jordan Ellis · Published
Quick Answer
For a first home, the FHSA beats the TFSA dollar-for-dollar: contributions are tax-deductible like an RRSP and withdrawals for a qualifying purchase are tax-free like a TFSA — a $3,200 government boost per $8,000 contributed at a 40% marginal rate, on up to $40,000 lifetime. Use the FHSA first to its $8,000/year limit, then the TFSA for overflow; if you never buy, the FHSA rolls into your RRSP with no penalty.
If you’re saving for a first home in Canada and these two accounts are competing for your next dollar, the FHSA wins every single time you’re eligible. Here’s the math.
Same exit, better entrance
Both accounts grow tax-free and both let you withdraw for a home tax-free. The difference is the entrance: FHSA contributions are deductible — like an RRSP — while TFSA contributions are not.
| FHSA | TFSA | |
|---|---|---|
| Tax deduction going in | Yes | No |
| Tax-free growth | Yes | Yes |
| Tax-free withdrawal for a home | Yes | Yes |
| Refund on $8,000 at 40% MTR | $3,200 | $0 |
Over the $40,000 lifetime limit, that’s up to $12,000–$19,000 of refunds the TFSA can’t match (at 30–48% marginal rates). Project the growth side on the FHSA calculator.
The catch (and why it’s small)
FHSA money must buy a qualifying first home within the account’s 15-year life — otherwise it rolls into your RRSP, tax-free, without consuming RRSP room. That’s not a punishment; it’s free extra RRSP space. The genuinely bad outcome is withdrawing as cash, which is taxed as income — so don’t.
The TFSA’s advantage is pure flexibility: any goal, any time, room returns next year (room rules). For a dedicated home fund, flexibility is worth less than the deduction.
The optimal stacking order
- FHSA to $8,000/year — capture the deduction every eligible year; open it early, even with $1, to start the 15-year clock and carry-forward
- Employer RRSP match — free money beats everything
- RRSP toward the HBP — $60,000 more, repayable over 15 years
- TFSA for overflow — flexible, and pairs with the rest at closing
A couple running this sequence for five years can assemble $200,000+ of down payment, mostly government-subsidized. Full program details: every first-time buyer program, stacked.
The one-line answer
Eligible for an FHSA and saving for a first home? FHSA first, TFSA second, every year, no exceptions. Check your exact growth-and-refund projection on the FHSA calculator.
Official sources
Rules and dollar limits change. Confirm current amounts with the official pages below before you act · Last reviewed .
- First Home Savings Account (FHSA) (Canada Revenue Agency)
- Tax-Free Savings Account (TFSA) (Canada Revenue Agency)
- Calculate your TFSA contribution room (Canada Revenue Agency)
- Mortgage loan insurance cost (CMHC)