$40,000

Annual tax-deductible FHSA contribution limit

Lifetime contribution limit for FHSA

What you'll pay in taxes on FHSA earnings

$8,000

$0

What is an FHSA?

An FHSA is a tax-free savings account designed to help future homeowners save for the purchase of a qualifying first home in Canada. Work towards your goal of buying your first home with a First Home Savings Account (FHSA). This new account is a great savings vehicle for your homebuying goals because you never pay a tax bill on these savings. 

Combining the advantages of an RRSP and a TFSA, the FHSA gives you a deduction that reduces your annual taxable income and allows you to generate tax-free returns. You can then use the accumulated funds to finance the purchase of a first home without having to pay taxes on withdrawals, and without having to repay the amounts withdrawn from the FHSA.

Reasons to Invest in an FHSA

The First Home Savings Account (FHSA) is a new type of registered plan that’s designed to help you save for your first home, tax-free. Your contributions will be tax-deductible, like a registered retirement savings plan (RRSP). Your qualifying withdrawals will be non-taxable, like a tax-free savings account (TFSA).

• As with an RRSP, your FHSA contributions reduce your annual taxable income.

• Your savings and returns generated in the FHSA are tax free upon withdrawal. Pay no taxes on any investment earnings

• Use it to save up to $40,000 for your first home

• Contribute tax-free for up to 15 years

• You can carry forward up to $8,000 of unused contribution room, for a maximum annual contribution of $16,000

• Unlike RRSP withdrawals under the Home Buyers’ Plan (HBP), sums withdrawn from an FHSA for the purchase of a first home do not have to be repaid

• Potentially reduce your tax bill and carry forward un-deducted contributions indefinitely

• Complements the Home Buyers’ Plan (HBP)

• You can transfer funds from your FHSA to your RRSP or your RRIF if you are not using them

Did you know?

To purchase your first home, you can combine savings with returns from your TFSA and your FHSA, and up to $35,000 from your RRSP through the Home Buyers’ Plan (HBP). An advisor can work with you to determine the best strategy for you.

Who is eligible to open an FHSA?

• You're a Canadian resident and you've reached the age of majority in your province or territory

• You're an eligible first-time homebuyer who hasn’t lived in a qualifying home in the current or past 4 calendar years

• Must not have had a qualifying home in Canada as your principal place of residence that you or your spouse owned during the part of the calendar year preceding the opening of the FHSA or during the preceding four calendar years.

• Must not be over 71 years of age as of December 31 of the current year.

New to Canada?

You may be eligible to use the FHSA to save for your first home. You’ll need to be a Canadian resident for tax purposes with either a Social Insurance Number (SIN) or a temporary SIN. You also need to be considered a “first-time homebuyer”, which means that during the current or last 4 calendar years you haven’t lived in a “qualifying home” that you owned or jointly owned.

If you're a newcomer to Canada, you can open an FHSA if you're a Canadian resident for tax purposes who has a SIN or temporary SIN. In addition to being the age of majority in your province or territory of residence, you must also meet the criteria for a "first-time homebuyer".

To be considered a first-time homebuyer, you must not have lived in as a principal place of residence at any time during the part of the calendar year before the account is opened or at any time in the preceding four calendar years, a “qualifying home” (or what would be a qualifying home if it was located in Canada) that either (i) you owned or (ii) your spouse or common law partner owned (if you have a spouse or common law partner at the time of opening the account).

How can I withdraw my FHSA savings tax-free?

• You're a Canadian resident and a first-time homebuyer at the time of the withdrawal

• You have an agreement to buy or build a qualifying home

• You intend to occupy the home as your principal residence within 1 year of acquiring the home

What is a qualifying withdrawal?

• You must be a first-time homebuyer and a resident of Canada at the time of the withdrawal for the acquisition of your qualifying home

• A "qualifying home" is defined as a housing unit located in Canada. It also includes a share of the capital stock of a cooperative housing corporation, where the holder of the share is entitled to possession of a housing unit located in Canada

• You must have a written agreement to buy or build a qualifying home located in Canada before October 1 of the year following the year of withdrawal.

• You must also intend to occupy the qualifying home as your principal place of residence within one year of buying or building it

Contribution Room

You can contribute up to $8,000 per year to your FHSA, for a maximum of $40,000 during your lifetime.

You can also carry forward up to $8,000 of unused contribution room from one year to the next, for a maximum annual contribution of $16,000

Contribution Deadline

The FHSA contribution deadline is December 31 of each year

How does an FHSA work?

• Annual contributions are capped at $8,000 up to a $40,000 lifetime contribution limit

• A maximum of $8,000 unused contribution room can carry forward to the following year

• The account can stay open for a maximum 15 years or until the end of the year you turn 71

Contribute often to help your money grow faster, tax-free

Since your investment earnings aren’t taxed, your money will have the opportunity to grow faster in an FHSA than it would in a traditional savings account.

You can make tax-deductible contributions of up to $8,000 a year in an FHSA, up to a lifetime maximum of $40,000. Unused room can be carried over to the next year, up to a maximum of $8,000.

Setting up regular (weekly, monthly, etc.) automatic contributions into your FHSA is an easy way to help you stay on track towards your savings goals.

If you are planning to buy a home in the next few years and don’t have enough time to earn the maximum amount of $40,000 in the FHSA, you still could still use your savings from the account in combination with the other new tax proposals.

The federal government also announced that the First-Time Home Buyers' Tax Credit will increase to $10,000, which provides up to $1,500 in direct homebuyer support.

Plus, the First-Time Homebuyer Incentive, which allows new owners to lower their monthly payments, has been extended until March 31, 2025.

Withdraw your money to buy your first home

Make a tax-free withdrawal at any time to purchase a qualifying home. You’ll be able to use both an FHSA and the Home Buyers’ Plan (HBP) to purchase a qualifying home. Keep in mind that you’ll have to repay any funds through the HBP, but not with an FHSA.

Can I transfer funds from my RRSP to an FHSA?

• You can transfer funds from your RRSP to your FHSA on a tax-free basis. These transfers are subject to FHSA annual and lifetime contribution limits. Such transfers are not deductible from income.

• Transfers from an RRSP to an FHSA do not restore your RRSP contribution room.

• In-kind transfers will not be available for the FHSA at this time

What if you don't purchase a home?

If you don't use your FHSA to buy a home, you can transfer the funds to an RRSP account anytime within 15 years or at the time you need to close your account. The transfers will not impact your RRSP’s contribution room.

Alternatively, you can withdraw the amount, but the funds would be subject to withholding taxes.

• Funds withdrawn from your FHSA that are not used to purchase a qualifying home are subject to income tax

• Alternatively, the balance in your FHSA not used to purchase a qualifying home could be transferred to an RRSP or RRIF (Registered Retirement Income Fund) on a non-taxable transfer basis, subject to applicable rules

• Transfers from your FHSA to your RRSP or RRIF do not impact your available RRSP contribution room

• The funds transferred to an RRSP or RRIF will be taxed upon withdrawal

FHSA vs HBP: What are the main differences?

What is the difference between a FHSA and a HBP? And which one should you choose? It depends on your savings goals, as well as your financial and tax situation.

FHSA

The Tax-Free First Home Savings Account is a new registered account that provides tax-free savings for first-time home buyers.

• No repayment required

• No withdrawal limit

• Maximum annual contributions of $8,000 and a lifetime total of $40,000

• No minimum holding period required for contributions to be deductible and eligible for withdrawal

• The deadline for contributions to a FHSA is December 31 of each year

HBP

The Home Buyers' Plan (HBP) is a program that allows you to withdraw funds from your RRSP to buy or build a first home.

• Repayment required

• Withdrawal limit of $35,000

• Maximum annual contributions of the RRSP, which is 18% of your previous year’s income or the current fixed contribution limit

• The money must be deposited into your RRSP 90 days before you withdraw it under the HBP

• Deadline for RRSP contributions: 60 days after the end of the year

FHSA CALCULATOR

Calculate how much you will have saved in your FHSA for the purchase of your first home.

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