Why your FHSA should come before your RRSP in 2026

You get the same upfront tax deduction from your FHSA as you do from your RRSP. But when you withdraw from the FHSA to buy a home, that money comes out tax-free. The RRSP makes you pay it back.

This is why the FHSA should be your first $8,000 if you're planning to buy a home in the next few years - even if you're earning $100k and the RRSP refund looks tempting.

The FHSA gives you everything the RRSP does, plus more

Both accounts work the same way upfront. Contribute $8,000 to either one, get the same tax deduction. At $80k in Ontario, that's roughly $2,500 back from either account. The FHSA doesn't give you a smaller refund just because the lifetime limit is lower.

The difference shows up when you buy the house. FHSA withdrawals are tax-free forever. RRSP withdrawals through the Home Buyers' Plan have to be repaid over 15 years, starting the second year after you withdraw. Miss a repayment and it gets added to your taxable income.

Say you withdraw $35,000 from each account to buy a home. The FHSA money is yours, done. The RRSP money comes with a $2,333 annual repayment requirement for the next 15 years.

The math only gets better if you don't buy

If you never buy a home, the FHSA converts to RRSP room when you turn 71 or after 15 years - whichever comes first. You don't lose the tax benefit. You just get to keep the flexibility until then.

This means the FHSA is never worse than the RRSP for the same contribution. It's either the same (if you never use it for a home) or better (if you do).

The only argument for RRSP first is if you're certain you'll never buy and you want to contribute more than $8,000 this year. The RRSP limit for 2025 contributions is $32,490 - much higher than the FHSA's $8,000 annual room.

Even high earners should max the FHSA first

At $120k in Ontario, your marginal rate is around 43%. That RRSP refund feels significant - $8,000 contributed gets you roughly $3,440 back. The FHSA gives you the exact same $3,440 refund, plus the tax-free withdrawal option.

The RRSP only makes sense first if you're maxing both accounts anyway. Most people aren't. TaxSplit.ca shows the exact refund amounts, but the principle holds across all income levels: same deduction upfront, better treatment on withdrawal.

The catch with FHSA timing

You need to open the account before you can contribute to it, and you can only contribute for 15 years total. If you're 35 and open an FHSA now, your contribution window closes at 50. The RRSP keeps going until you turn 71.

Also, you lose FHSA eligibility once you own a home as your principal residence. Buy a house using other money, and you can't contribute to the FHSA anymore - even if you sell that house later.

But if you're renting and planning to buy in the next decade, the FHSA's combination of RRSP-level tax benefits and TFSA-level withdrawal flexibility is hard to beat. Max the $8,000 there before putting anything into your RRSP.