Whether you are saving for your own first home or helping a child or grandchild get there, the right account strategy can make a significant difference – both in how fast you get there and how much you keep along the way.

Here is how to think about it.

Start Here: The First Home Savings Account (FHSA)

The FHSA is the most powerful tool available for first-time home buyers, and in most cases it should be your first priority.

How it works:

• You can contribute $8,000 per year, up to a lifetime maximum of $40,000
• Contributions are tax-deductible, just like an RRSP
• Growth inside the account is tax-free
• Qualifying withdrawals to buy a first home are also completely tax-free
• That means you get a deduction going in and pay nothing coming out – the best of both worlds

Key rules to know:

• You must be a Canadian resident, at least 18, and a first-time home buyer (meaning you have not owned a home you lived in at any point in the current year or the prior four calendar years – this includes a home owned by your spouse or common-law partner that you lived in during that period)
• The FHSA can remain open for a maximum of 15 years from the year it was first opened- if a qualifying home purchase has not been made by that point, the funds must be transferred to an RRSP or RRIF, or withdrawn and taxed as income
• Unused contribution room carries forward by $8,000 per year (up to $8,000 maximum carry-forward)

Quick tip – Open the account now if you are reasonably confident you will buy your first home within 15 years, even if you are not ready to contribute. Contribution room of $8,000 per year begins accumulating the year you open the account, though unused room can only be carried forward one year at a time – so the maximum unused room you can ever carry forward is $8,000. You do not need to deposit anything right away.

If you open an FHSA and make no contributions in a given year, no contribution receipt will be issued. You will still need to file Schedule 15 with your tax return for that year so CRA can track your account and apply your accumulated contribution room.

For parents and grandparents: You cannot contribute directly to someone else’s FHSA, but you can gift them the cash to contribute themselves, provided they meet the eligibility rules. This is a clean and effective way to support a child or grandchild.

Second Priority: RRSP or TFSA – Depending on Your Timeline

Once you have maximized your FHSA for that respective year, the next question is whether to layer in RRSP, TFSA or a combination of savings for both. The right answer often depends on how quickly you want to buy and your other priorities.

RRSP + Home Buyers’ Plan (HBP): Faster to Your Down Payment

The Home Buyers’ Plan lets you withdraw from your RRSP tax-free to fund a home purchase – up to $60,000 per person (or $120,000 for a couple buying together).

• Your RRSP contributions give you a tax refund today, which you can redirect into additional savings – accelerating your timeline
• The HBP withdrawal itself is not taxed
• However, you must repay the amount withdrawn back into your RRSP over 15 years
• Those repayments do not generate a new tax deduction – you are simply restoring the room you used previously.

RRSP contributions must be made at least 90 days before the HBP withdrawal to be eligible. This catches people off guard more often than you would expect – plan ahead.

A note for incorporated dentists: RRSP contribution room is based on salary, not dividends. If you have been drawing primarily dividends from your corporation, your available RRSP room may be lower than you expect. Check your most recent Notice of Assessment before counting on the RRSP and HBP as a core part of your plan. For incorporated professionals, there may also be more flexible options worth exploring – such as shareholder loan strategies – though these come with important tax considerations and require careful planning with your advisor before proceeding.

FHSA + HBP: You Can Use Both

One point worth highlighting: the FHSA and the Home Buyers’ Plan are not mutually exclusive. A qualifying first-time buyer can withdraw from both the FHSA and the RRSP (via HBP) on the same purchase. That means up to $40,000 tax-free from the FHSA, plus up to $60,000 from the RRSP via HBP – a combined $100,000 per person, or $200,000 for a couple, before investment returns or TFSA savings are factored in. This is one of the most powerful and underutilized combinations available.

TFSA: Slower, but Simpler

The TFSA does not give you a tax deduction when you contribute, which means you do not get the immediate refund boost. That makes it a slower vehicle for accumulating a down payment.

That said, there are meaningful advantages:

• Withdrawals are always tax-free, with no repayment obligation
• Once you buy your home and the FHSA is behind you, your full RRSP contribution room remains intact for future tax-planning opportunities
• TFSA contribution room is not lost – it is restored the following January after a withdrawal

If your timeline for buying is longer and you do not need the immediate tax deduction to reach your down payment goal, the TFSA can be a sensible complement to the FHSA for your goals. This will allow you to avoid the HBP repayment in the future.

A Practical Example: Income of $300,000

Consider a dentist in their late 20s or early 30s earning $300,000 personally, buying their first home in three to four years.

At $300,000 of personal income in Ontario, their highest marginal tax rate is 53% – meaning every dollar contributed to a deductible account generates over 50 cents back in tax savings.

Year 1 strategy:

• Open and max the FHSA: $8,000 contributed, generating $4,240 in tax savings
• Contribute $20,000 to RRSP, generating $10,600 in tax savings
• Direct those combined refunds ($14,840) into the TFSA for additional down payment savings

By the end of year 4, assuming the FHSA is maximized each year and RRSP contributions of $20,000 continue annually, this individual could realistically accumulate:

• $32,000 in the FHSA
• Up to $60,000 available via HBP from RRSP
• Approximately $59,360 in TFSA savings, funded by the $14,840 in annual tax refunds redirected each year over four years

That is a potential down payment of $151,000 or more, with a significant boost from money that would otherwise have gone to the CRA. This also doesn’t even factor in potential investment returns.

The Bottom Line

The FHSA should be your starting point. It is the only account that offers a tax deduction on contributions, tax-free growth, and a tax-free withdrawal – all without any repayment requirement. The FHSA and HBP can be stacked on the same purchase, making the combination more powerful than either account alone. After that, the TFSA gives you flexibility and keeps your RRSP room available for retirement goals.

If you are a dentist looking to support a child or grandchild with their first home purchase, gifting funds for FHSA contributions is one of the most tax-efficient ways to help – and encouraging them to open the account today, even before they are ready to save, costs nothing and builds valuable contribution room.

To discuss the appropriate investment vehicles and accounts for your specific goals (or theirs), connect with Cory Wilson, Wealth Advisor at Protect Financial by calling (416) 391 – 3764 ext. 104 or email cory.wilson@protectfinancial.ca