Yes, both are tax-sheltered accounts, but they have different rules and tax implications. While TFSAs have a fixed annual contribution limit (e.g., $6,500 in 2023), FHSA contributions can reach up to $8,000 per year, and the contribution room only accumulates after opening the account. Unlike TFSAs, FHSA contributions reduce your taxable income, but withdrawals are tax-free only if used for your first home.
The key difference lies in repayment requirements. FHSA withdrawals for a home purchase do not require payback, while RRSP Home Buyers' Plan withdrawals must be repaid within 15 years. Many find FHSA a great starting point for home savings before considering RRSP contributions.
Yes, you can combine these savings tools. The Home Buyers' Plan allows you to withdraw up to $35,000 from your RRSP tax-free for a home purchase, but it requires repayment within 15 years. Combining this with FHSA funds can significantly boost your resources for buying a home.
Consider your circumstances. Transferring from RRSP to FHSA can make sense if you have new savings to put into your FHSA and want to reduce your taxable income. However, remember that transferring RRSP funds permanently reduces your contribution room.