Key Takeaways
- 1.Both the FHSA and the RRSP give a federal + Quebec provincial deduction on contributions. On $40,000 at a $95K income, the upfront deduction is worth roughly $17,200 either way.
- 2.The FHSA withdrawal for a qualifying purchase is permanently tax-free. The HBP withdrawal must be repaid over 15 years or the unpaid balance is taxed — a $2,667/year obligation on a $40K withdrawal.
- 3.If you miss all HBP repayments, the full $40,000 ends up in your taxable income over 15 years — costing an additional $12,000–$17,200 in combined federal + Quebec tax depending on income.
- 4.Quebec's provincial deduction on FHSA contributions adds approximately $1,200–$1,600 in tax savings beyond the federal benefit alone, depending on which Quebec bracket you fall in.
- 5.For a buyer who can only fund one account, the FHSA wins in almost every scenario — unless you need more than $40,000 and already have RRSP room, in which case combining both is optimal.
How Each Account Works for a Home Purchase
Before comparing numbers, let's set the ground rules for each account. The mechanics are fundamentally different even though the upfront deduction looks similar.
FHSA — First Home Savings Account:
Annual contribution limit: $8,000
Lifetime contribution limit: $40,000
Time to fill: 5 years minimum
Deduction: federal + Quebec provincial (same as RRSP)
Growth inside account: tax-free
Withdrawal for qualifying purchase: tax-free
Repayment obligation: none
Must be first-time buyer (no home ownership in current year + prior 4 calendar years)
RRSP Home Buyers' Plan (HBP):
Maximum HBP withdrawal: $60,000 (increased from $35,000 in 2024)
Deduction on contributions: federal + Quebec provincial
Growth inside account: tax-deferred
Withdrawal for qualifying purchase: not taxed at withdrawal
Repayment obligation: $60,000 ÷ 15 = $4,000/year (or $40,000 ÷ 15 = $2,667/year for our scenario)
Repayment starts: 2nd year after withdrawal year
Missed repayments: added to taxable income
Must be first-time buyer (same definition)
The critical difference: the FHSA gives you a deduction on the way in and a tax-free withdrawal on the way out. The HBP gives you a deduction on the way in but requires you to put the money back — it is a loan from yourself, not a tax-free benefit. For a broader look at how the FHSA works for a West Coast buyer, see our FHSA calculator for a BC first-time buyer.
Quebec's Provincial Deduction: Why It Matters More Here
Quebec operates its own income tax system, separate from the federal system. When you contribute to either an FHSA or an RRSP, you get a deduction on both your federal return and your Quebec provincial return (TP-1). This is mechanically different from other provinces, where provincial tax savings flow indirectly through the federal calculation. In Quebec, you see the provincial savings explicitly.
Quebec 2025 provincial tax brackets:
$0 – $51,780: 14%
$51,780 – $103,545: 19%
$103,545 – $126,000: 24%
$126,000+: 25.75%
Quebec deduction value on $8,000 FHSA contribution:
At $75,000 income (19% bracket): $8,000 × 19% = $1,520 Quebec savings
At $95,000 income (19% bracket): $8,000 × 19% = $1,520 Quebec savings
Federal deduction value on $8,000 FHSA contribution:
At $75,000 income (20.5% bracket): $8,000 × 20.5% = $1,640 federal savings
At $95,000 income (20.5% bracket): $8,000 × 20.5% = $1,640 federal savings
Combined annual tax savings per $8,000: $1,640 + $1,520 = $3,160
This combined rate of approximately 39.5% on FHSA contributions is identical for RRSP contributions at the same income level. The difference between the two accounts is not in the deduction — it is in what happens when you take the money out.
Head-to-Head: $40,000 FHSA vs. $40,000 HBP at $75,000 Income
Let's assume a Quebec resident earning $75,000 contributes $8,000 per year for 5 years. In one scenario, the contributions go to an FHSA. In the other, they go to an RRSP and are withdrawn under the HBP at purchase time. We assume 5% annual investment returns inside both accounts.
Scenario A — FHSA route ($75K income):
Contribution phase (5 years, $8,000/year):
Total contributed: $40,000
Federal deductions: 5 × ($8,000 × 20.5%) = $8,200
Quebec deductions: 5 × ($8,000 × 19%) = $7,600
Total tax savings from deductions: $15,800
Account balance at purchase (5% return): ~$44,503
Withdrawal:
Amount withdrawn: $44,503 (full balance)
Tax on withdrawal: $0
Repayment obligation: $0
Net benefit over 20 years:
Tax savings from deductions: $15,800
Tax-free growth withdrawn: $4,503
Future tax obligation: $0
Total tax advantage: $15,800 + $4,503 = $20,303
Scenario B — RRSP + HBP route ($75K income):
Contribution phase (5 years, $8,000/year):
Total contributed: $40,000
Federal deductions: $8,200 (same as FHSA)
Quebec deductions: $7,600 (same as FHSA)
Total tax savings from deductions: $15,800
Account balance at purchase (5% return): ~$44,503
HBP withdrawal: $40,000 (maximum, leaving $4,503 in RRSP)
Repayment phase (15 years):
Annual repayment: $40,000 ÷ 15 = $2,667/year
Total repaid over 15 years: $40,000
If all repayments are made:
Tax on repayments: $0 (repayments are not deductible, but avoid income inclusion)
Net cost: $40,000 returned to RRSP (locked up again until retirement)
If NO repayments are made:
$2,667/year added to taxable income for 15 years
Tax on each $2,667 at ~39.5% marginal: ~$1,053/year
Total tax over 15 years: $15,800
This exactly offsets the original deduction — you gained nothing
Net benefit over 20 years (repayments made):
Tax savings from deductions: $15,800
Tax-free growth: $0 ($4,503 stays in RRSP, taxed later)
Cash returned to RRSP: −$40,000 (opportunity cost)
Total tax advantage: $15,800 minus the opportunity cost of $40,000 locked in RRSP
The hidden cost of the HBP: Even if you make every repayment, that $40,000 goes back into the RRSP where it will eventually be taxed on withdrawal in retirement. The FHSA withdrawal is permanently tax-free. At a 30% retirement tax rate, the $40,000 RRSP balance will cost approximately $12,000 in future tax. The FHSA costs $0. That $12,000 difference is the real advantage of the FHSA over the HBP.
Head-to-Head: $40,000 at $95,000 Income
At a higher income, the deduction is worth more because the marginal rate is higher. But the HBP repayment penalty for missed payments is also steeper.
At $95,000 Quebec income — marginal rates:
Federal: 20.5% (income $59,867–$106,731)
Quebec: 19% (income $51,780–$103,545)
Combined marginal: 39.5%
FHSA tax savings on $40,000 total contributions:
Federal: $40,000 × 20.5% = $8,200
Quebec: $40,000 × 19% = $7,600
Total: $15,800
RRSP/HBP tax savings on $40,000 contributions:
Identical: $15,800
FHSA withdrawal: $0 tax
HBP if fully repaid: $0 tax at withdrawal, but $40,000 locked back in RRSP
HBP if never repaid: $40,000 × 39.5% = $15,800 tax over 15 years
At $95K income, the marginal rates are the same as $75K (both fall in the 20.5% federal / 19% Quebec brackets). The numbers shift at $106,731 federal and $103,545 Quebec, where the next brackets begin. If your income is above $103,545, the Quebec deduction value rises to 24%, making the combined rate approximately 44.5%.
For workers earning near the $103,545 Quebec bracket threshold, FHSA contributions can be strategically timed to maximize the deduction in higher-income years. For context on how RRSP and FHSA contributions interact at year-end, see our FHSA + RRSP year-end combo calculator.
The 15-Year HBP Repayment: What It Really Costs
The HBP repayment is the most misunderstood part of the Home Buyers' Plan. Many buyers treat it as “free money” and then are surprised when the CRA adds $2,667 to their taxable income each year they miss a repayment.
HBP repayment timeline on $40,000 withdrawal (purchased in 2026):
2026: Withdrawal year — no repayment due
2027: Grace year — no repayment due
2028: First repayment due: $2,667
2029: Second repayment: $2,667
...
2042: 15th and final repayment: $2,667
Total repaid: $40,000 (back into RRSP)
Cost of missing repayments (at 39.5% combined rate):
Miss 1 year: $2,667 added to income → ~$1,053 tax
Miss 5 years: $13,335 added to income → ~$5,267 tax
Miss all 15 years: $40,000 added to income → ~$15,800 tax
Opportunity cost of making repayments:
$2,667/year that could go to TFSA, mortgage prepayment, or FHSA
Over 15 years at 5% return: ~$57,600 (vs. $40,000 contributed)
Lost alternative growth: $17,600
This is where the FHSA's advantage compounds. You contribute $40,000, withdraw it tax-free, and the $2,667/year you would have spent on HBP repayments can go straight into a TFSA, non-registered investments, or mortgage prepayments. Over 15 years, that flexibility is worth more than the HBP's higher withdrawal ceiling.
Decision Table: FHSA vs. HBP for Quebec Buyers Who Can Only Fund One
If your cash flow limits you to $8,000/year and you can only choose one account, here is the decision framework.
| Factor | FHSA | RRSP + HBP |
|---|---|---|
| Upfront deduction | Yes (federal + Quebec) | Yes (federal + Quebec) |
| Max withdrawal for purchase | $40,000 + growth | $60,000 (no growth included) |
| Withdrawal taxed? | No — permanently tax-free | No, but must be repaid |
| Repayment obligation | None | $2,667–$4,000/year for 15 years |
| Growth withdrawn tax-free? | Yes | No (growth stays in RRSP, taxed later) |
| Time to accumulate $40K | 5 years minimum | 1 year (if RRSP room exists) |
| If you never buy | Transfer to RRSP (no tax, no room used) | Already in RRSP |
| Best for | Buyers with 5+ year horizon | Buyers needing funds within 1–2 years |
Bottom line: If you have 5 years before you buy and can only fund one account, the FHSA wins. The tax-free withdrawal and zero repayment obligation save you $12,000–$17,000 in lifetime tax compared to the HBP. The only scenario where the HBP is clearly better is when you need to buy within 1–2 years and already have $40,000+ in RRSP room — you cannot fill an FHSA that fast. For buyers using the HBP as newcomers, see our newcomer Home Buyers' Plan calculator.
The Combined Strategy: Use Both Accounts
If your cash flow supports it, the optimal approach is to use both. Contribute $8,000/year to the FHSA for 5 years ($40,000 total) and simultaneously build RRSP room for an HBP withdrawal. At purchase time, you withdraw $40,000+ from the FHSA tax-free and up to $60,000 from the RRSP under the HBP.
Combined strategy: $40K FHSA + $40K HBP at $95K income:
FHSA contributions over 5 years:
Total contributed: $40,000
Tax savings: $15,800
Account balance at withdrawal (5% growth): ~$44,503
Tax on withdrawal: $0
RRSP contributions over 5 years (additional):
Total contributed: $40,000
Tax savings: $15,800
HBP withdrawal: $40,000
Repayment required: $2,667/year for 15 years
Total available for down payment:
FHSA: $44,503
HBP: $40,000
Total: $84,503
On a $600,000 condo:
Minimum down payment (5% on first $500K + 10% on next $100K): $35,000
$84,503 is a 14.1% down payment
Avoids CMHC mortgage insurance (threshold: 20% = $120,000)
— you'd still need ~$35,500 more to avoid CMHC
Total annual contributions needed: $16,000/year ($8K FHSA + $8K RRSP)
At $95K gross income, this is approximately 17% of gross
The combined approach gives you maximum flexibility: tax-free withdrawal on the FHSA portion and a larger total pool for the down payment. The trade-off is the 15-year repayment obligation on the HBP portion. For Quebec-specific tax considerations on employment income and deductions, see our Quebec home office deduction calculator.
Quebec Welcome Tax (Droits de Mutation) on a $600K Condo
While comparing savings strategies, do not forget the upfront transfer tax that Quebec charges on property purchases. This is a separate cost from your down payment and is not covered by FHSA or HBP withdrawals.
Quebec welcome tax on a $600,000 purchase:
$0 – $58,900: 0.5% = $295
$58,900 – $294,600: 1.0% = $2,357
$294,600 – $500,000: 1.5% = $3,081
$500,000 – $600,000: 3.0% = $3,000
Total droits de mutation: $8,733
Montreal adds a supplemental transfer tax for properties over $500K:
$500,000 – $600,000: additional 0.5% = $500
Total if purchasing in Montreal: $9,233
Note: First-time buyers in Quebec do NOT get a welcome tax exemption (unlike some other provinces' land transfer tax rebates). Budget for this amount in addition to your down payment.
Summary: Which Saves More Tax?
| Metric | FHSA ($75K) | HBP ($75K) | FHSA ($95K) | HBP ($95K) |
|---|---|---|---|---|
| Upfront deduction value | $15,800 | $15,800 | $15,800 | $15,800 |
| Tax on withdrawal | $0 | $0* | $0 | $0* |
| 15-year repayment cost | $0 | $40,000 repaid | $0 | $40,000 repaid |
| Tax if repayments missed | N/A | $15,800 | N/A | $15,800 |
| Future tax on funds in retirement | $0 | $12,000–$17,200 | $0 | $12,000–$17,200 |
| Lifetime tax advantage | $15,800 | $0–$3,800 | $15,800 | $0–$3,800 |
*HBP withdrawal is not taxed at the time of withdrawal, but requires repayment. If repaid, the funds are taxed when eventually withdrawn from the RRSP in retirement.
Important Disclaimer
This article provides general information about the FHSA and RRSP Home Buyers' Plan for Quebec residents in 2025. Tax brackets, contribution limits, HBP withdrawal limits, and Quebec transfer tax rates are subject to change through federal and provincial budget legislation. The FHSA was introduced in 2023 and its rules may be amended. Quebec droits de mutation rates vary by municipality — Montreal rates shown include the supplemental tax. The $60,000 HBP limit applies to withdrawals made after April 16, 2024. This is not legal, financial, or tax advice. Consult a qualified financial planner and tax professional for advice specific to your situation.