Here’s how acting before December 31st can give you extra contribution room.
As 2025 winds down and we prepare to welcome 2026, there’s one financial step first-time home buyers in Canada shouldn’t overlook:
opening a First Home Savings Account (FHSA) before December 31st.
Even if you’re not ready to buy a home tomorrow, this one move could help you save thousands in taxes and accelerate your path to homeownership.
What is an FHSA?
The First Home Savings Account (FHSA) is a relatively new savings tool designed to make it easier for Canadians to buy their first home.
It combines the best features of both the RRSP and the TFSA:
Like an RRSP: Contributions are Tax-Deductible, meaning you get a refund when you file your taxes.
Like a TFSA: Withdrawals for your first home purchase are completely Tax-Free.
That means you save on taxes when money goes in and when it comes out. No other account in Canada offers this double benefit.
Key details:
Contribution limit: $8,000 per year
Lifetime maximum: $40,000
Account lifespan: 15 years from the day you open it
Unused funds: Transferable to your RRSP with no penalty and no impact on RRSP contribution room.
Why the December 31st Deadline Matters
Here’s where the timing comes in.
You don’t need to contribute right away to start building the FHSA room. The simple act of opening an FHSA before December 31st, 2025, gives you contribution room for 2025.
This matters because:
Open in December 2025 → You unlock $8,000 of contribution room for 2025.
On January 1st, 2026 → You instantly gain another $8,000 of room.
Result: You’ll have $16,000 in contribution room ready to go in 2026, instead of just $8,000 if you wait until January.
Think of it as “stacking” an extra year of contribution room.
What If You Don’t Have Extra Money Right Now?
That’s okay. Many people feel stretched at year-end.
The good news: you don’t need to deposit money yet.
Simply opening the FHSA locks in your 2025 contribution room, so you can contribute later — in 2026, whenever you’re ready.
It’s like reserving your spot in line for future savings.
How Much Could You Save?
If you contribute the full $8,000, your tax refund could be anywhere from $1,500 to $2,500, depending on your income level. That’s money back in your pocket simply for using the account.
For couples, the advantage doubles: both partners can open their own FHSAs. Together, that’s up to $80,000 in contributions, plus double the tax refunds.
Parents or relatives can also gift money to help you fund your FHSA, while you (the account holder) keep the tax benefits.
Where Should You Invest FHSA Savings?
The right approach depends on your home-buying timeline:
- Buying within 5 years? Keep it low-risk. Use high-interest savings accounts, GICs, or conservative ETFs. Stability is more important than growth.
- Buying in 5+ years? You’ve got time to let it grow. Consider ETFs, index funds, or Canadian bank stocks for long-term compounding.
Always match your investment strategy to your buying horizon.
Bonus: FHSA + Home Buyers’ Plan
Here’s another strategy: the FHSA isn’t the only tool available.
You can combine it with the Home Buyers’ Plan (HBP), which allows you to withdraw up to $60,000 from your RRSP for a down payment.
Together, the FHSA and HBP can significantly boost your home-buying power while minimising your tax bill.
Take the Next Step With a Home Buying Plan
Opening an FHSA is just one piece of your homeownership journey. The bigger question is: how much should you save, and how will different down payment strategies affect your mortgage affordability?
That’s where my Home Buying Planner comes in.
It helps you:
- Run scenarios for different down payments
- See how much house you can afford
- Create a timeline to hit your savings goals
And the best part? It’s now available in Google Sheets, so you can easily update it anytime, from anywhere.
👉 If you’re planning to buy your first home, start by opening an FHSA before December 31st — and then use the Home Buying Planner to map out the rest of your strategy.
