TFSA, FHSA, RRSP, HBP — it’s easy to feel overwhelmed when trying to make sense of all these savings options. How can you as a first-time buyer best leverage these tools?
In Québec, those considering a property purchase have a number of financial instruments at their disposal. Offered by the government and administered by several financial institutions, the TFSA, FHSA, RRSP, and the HBP program can make all the difference.
The key is knowing how to use them to your advantage! Let’s examine these investment vehicles in more detail.
What the RRSP, TFSA, and FHSA All Have in Common
They’re all investment vehicles.
Specifically, these vehicles are structured to hold a range of investments: cash, stocks, portfolios like mutual funds or segregated funds, guaranteed investments, etc. The goal is to generate investment returns over time.
These vehicles differ from each other in a few ways, but the biggest one lies in how the government taxes the money. This is why you must tailor your strategy to your needs.
Financial security advisor and owner of Groupe Financier Symbiose
What About the HBP Program?
Contrary to the RRSP, TFSH and FHSA, the HBP isn’t an investment vehicle, but a government program intended to assist first-time homebuyers. Through this program, buyers may draw out money from their RRSP to purchase a property without paying income tax on the amount withdrawn. It’s now possible to take out up to $60,000.
Keep in Mind
The amount withdrawn must be fully reimbursed over 15 years (in an RRPS of your choice, not necessarily the one you took the money from). However, buyers enjoy a grace period before they’re required to begin paying it back.
What’s a TFSA?
This type of savings account allows consumers to generate tax-free returns on their investments. But unlike an RRSP, these contributions aren’t tax deductible, that is to say you can’t use them to decrease your taxable income.
Many people believe that a TFSA constitutes the best investment vehicle to finance short-term projects, which is somewhat accurate thanks to the plan’s extremely flexible withdrawal conditions. What’s really true is that the longer the money sits in the account, the greater the potential for long-term growth.
Another advantage a TFSA has over an RRSP is that you can withdraw the money at any time without any tax implications. What you must absolutely avoid is exceeding the annual contribution limit.
What’s an RRSP?
It’s an investment vehicle that lets you defer your income tax payments (you pay later, typically during retirement) by strategically timing taxation. The aim is to pay as little tax as possible upon withdrawal, usually when you’re retired and when your income is lowest.
Some Concrete Examples
A person’s annual income drops to $50,000 per year when they retire, whereas 20 years ago, they were earning $100,000 in salary. The first income is taxed at approximately 32%, while the second is taxed at approximately 42%. Their tax rate has therefore gone down by 10%. It’s thus to this person’s advantage to defer taxation until retirement.
- Let’s consider another example. A person pays income tax throughout 2025 on their $100,000 yearly salary. If they contribute $10,000 to their RRSP, they’ll reduce their taxable income to $90,000. This means they’ve already overpaid on the $10,000. They will thus receive a tax refund from the government.
But remember that you will pay tax on the returns generated in an RRSP at the same rate as the capital when you withdraw the funds.
What’s an FHSA?
For a long time, many Quebecers took advantage of the HBP to use money from their RRSP to purchase their first home without any immediate fiscal impact.
But there’s a new kid on the block worth considering: the FHSA.
The FHSA combines the features of the HBP program and the TFSA. The government designed the plan to help people aged between 18 and 71 acquire their first property. They must not have owned a home during the past year plus the four previous tax years and must not be living with a homeowner when they open the FHSA.
Keep in Mind
The FHSA can be combined with the HBP if desired for added liquidity to fund the home purchase.
Contributions to a FHSA are tax deductible based on the amount and the depositor’s marginal tax rate just like for an RRSP. The big difference, and major advantage, is that the entire sum (capital and investment returns) is never subject to tax upon withdrawal and, unlike the HBP, no reimbursement is required.
An FHSA can remain open for a maximum of 15 years. If, in the end, the client hasn’t purchased a property, we can easily transfer it to an RRSP without any tax implications or impact on the RRSP contribution room. Whether the person buys or not, it’s still worth it because, during those years, the money invested will have grown tax-free!
Financial security advisor and owner of Groupe Financier Symbiose
How Contributions Work for Each Investment Option
The TFSA, FHSA, and RRSP all impose different contribution conditions.
- TFSA
The contribution maximum for 2025 is $7,000 (it can vary from year to year). However, unused contribution room from previous years (starting the year the person became eligible for a TSFA) is transferable to subsequent years, either all at once in a single lump sum or spread over the next few years.
- RRSP
The maximum a person can contribute to their RRSP each year corresponds to 18% of their previous year’s income, up to a yearly indexed limit. As with a TFSA, you can carry forward unused contribution room and make deposits over time when it benefits you most. The amount you’re entitled to is updated every year when you file your annual tax return and appears on your federal tax assessment.
- FHSA
The annual contribution limit is $8,000 (up to a maximum of $40,000).
Our Advice for First-Time Homebuyers
Now that you have a better understanding of each investment vehicle, you can use them to your advantage. Easier said than done? Here are some practical tips to help guide you.
1. Consult an advisor certified by the Autorité des marchés financiers (AMF).
Doing so is often free, and the advisor can work with you to develop a strategy that prioritizes your homeownership goal. You can read books on finance and educate yourself, but nothing beats a professional’s objective perspective!
2. When selecting an investment vehicle—RRSP, TFSA, or FHSA—avoid focusing on potential returns since they’re never guaranteed.
Instead, choose a strategy that aligns with your risk tolerance, your investment timeframe and, ultimately, your overall investor profile. “Some people like dynamic investments that fluctuate a lot, while others feel more comfortable with stability.”
3. Systematically invest a portion of your paycheque.
To set yourself up for financial success as soon as you enter the workforce, prioritize yourself when it comes to your earnings. Make sure you pay yourself first with savings, investments, etc.
4. Beware of “financial chatter.”
Exercise caution when it comes to accepting advice. Don’t listen to just anybody or believe everything you read on the internet! A particularly important point to remember is that each situation is unique, and what worked for one person won’t necessarily work for another.
5. Don’t be taken in by impressive returns.
Because no one can guarantee definite returns… unless they have a crystal ball!
Rapid Fire Round of Questions with a Professional
- Can I move my investments around easily?
You can rework your portfolio at any time. Over the years, your risk tolerance may evolve, as may your salary, or your plans. It’s important to adapt your portfolio to your changing circumstances. Guaranteed investment certificates are the only exceptions because they come with a fixed term and must be held to maturity.
- Is it better to have more than one kind of investment account?
Yes, it’s always best to diversify your investments. Overall, your portfolio should cover different markets: American, Canadian, fixed-income securities, dividend funds, etc. All this should align with your level of risk tolerance and your investor profile. Consolidating your portfolio with an investment advisor is also recommended. When you spread your investments across various institutions, it’s easy to lose track and not realize that some of your investments are underperforming.
- Can I move funds from an RRSP to a FHSA?
Yes, but only as a last resort. The issue is that this isn’t the best way to use it. If you pull money out of your RRSP to deposit it into an FHSA, you will have used up valuable RRSP contribution room. But by funding your FHSA directly from cash you have on hand, you won’t forfeit any RRSP contribution room. Keep in mind, however, that the program does allow you to transfer funds from your RRSP to a FHSA tax free.
- Are gifts of money from family considered income?
Within the context of a home purchase, gifts of money aren’t considered income. If a parent wants to help their child buy a property, a gift remains a tax-efficient option. Plus, there’s no negative tax impact for the recipient (provided the gift is made in a legally valid manner).
Nevertheless, if the gift constitutes a large sum meant to go toward the down payment, financial institutions will require that the donor sign a gift letter confirming the source of the funds. It should also be noted that money deposited into an RRSP or TFSA, even if it’s a gift and not earnings, are tax deductible as usual according to your marginal tax rate.
