Helping the next generation get into their first home has become one of the most common goals we hear from clients. With home prices what they are, a well-timed gift toward a down payment can make a meaningful difference—and the First Home Savings Account (FHSA) is one of the most tax-efficient ways to do it.

What is an FHSA?

The FHSA is a registered account, available since 2023, designed specifically to help first-time buyers save for a home. It combines the best features of two other registered accounts you’re probably already familiar with:

• Like a Registered Retirement Savings Plan, contributions are tax-deductible, reducing the account holder’s taxable income for the year.

• Like a Tax-Free Savings Account, any investment growth inside the account and the eventual withdrawal is completely tax-free, as long as it’s used for a qualifying home purchase.

That “deduct on the way in, tax-free on the way out” combination is unique among registered accounts and makes the FHSA an especially powerful tool for a specific, common goal: buying a first home.

The Key Numbers

• Annual contribution limit: $8,000 per year

• Lifetime contribution limit: $40,000

• Carry-forward: If you don’t contribute the full $8,000 in a given year, you can carry forward up to $8,000 of unused room to the following year

• Account lifespan: Up to 15 years from when it’s opened, until the end of the year the holder turns 71, or until the end of the year following a first qualifying withdrawal, whichever comes first

To open an account, an individual must be a Canadian resident, at least 18 years old, and a first-time home buyer, meaning they (or their spouse) haven’t owned and lived in a home in the current calendar year or the previous four calendar years.

The FHSA can also be paired with the Home Buyers’ Plan, allowing an eligible buyer to withdraw up to $60,000 from their RRSP toward the same home purchase—on top of whatever they’ve saved in their FHSA.

Here’s the Important Nuance for Parents and Grandparents

Unlike a TFSA, which anyone can fund on behalf of someone else, an FHSA can only be contributed to, and the tax deduction can only be claimed, by the account holder themselves. A parent or grandparent cannot contribute directly into a child’s or grandchild’s FHSA the way they might with a spouse’s RRSP.

The practical solution is straightforward: gift the money to your child or grandchild, and have them make the contribution into their own FHSA. There is no attribution rule that pulls the resulting tax deduction or investment growth back to the person who gave the gift—once it’s gifted, it’s fully theirs, and they get the full tax benefit. This makes annual gifting toward a grandchild’s or child’s FHSA one of the cleanest ways to help fund a future down payment while letting the recipient capture the deduction and tax-free growth themselves.

A few ways families are putting this into practice:

• Matching contributions: Gifting an amount each year to help a child or grandchild reach their $8,000 annual limit

• A lump-sum gift: Funding several years of contribution room at once if the recipient hasn’t maxed out their account

• Multi-generational coordination: Both parents and grandparents contributing gifts in the same year, since the $8,000 annual limit applies per recipient, not per gift-giver

Why This Strategy Works So Well

Because contributions are tax-deductible, a young adult with limited income may not benefit as much from a large deduction right away, but the rules allow the deduction to be claimed in a future year, once they’re in a higher tax bracket. That means gifted contributions made today can generate meaningful tax savings for the recipient down the road, all while the funds grow completely tax-free in the meantime.

For families thinking about how to help without simply handing over a lump sum at closing, funding an FHSA over several years can be a more structured, tax-smart alternative, and it starts the growth clock earlier.

This commentary is for informational purposes only and does not constitute investment advice. Please speak with your advisor to discuss how these themes apply to your individual financial situation.