The First Home Savings Account (FHSA) is a tax-advantaged account introduced in 2023 to help Canadians save for their first home. It combines features of the Tax-Free Savings Account (TFSA) and the Registered Retirement Savings Plan (RRSP), offering tax benefits for both contributions and withdrawals when purchasing a first home.

 

Key Features of the FHSA

 

• Eligibility

  • Open to Canadian residents aged 18 or older.

  • Applicants must be first-time home buyers, meaning they haven’t owned a home where they lived in the past four years.

• Contribution Limits

  • Annual contribution limit: $8,000 per year.

  • Lifetime contribution limit: $40,000.

  • Unused contribution room can roll over to the next year, up to the $8,000 yearly maximum.

• Tax Benefits

  • Contributions are tax-deductible, reducing taxable income, similar to RRSPs.

  • Investment growth (interest, dividends, and capital gains) is tax-free within the account.

  • Withdrawals for purchasing a qualifying home are tax-free, like TFSAs.

• Investment Options

  • The FHSA can hold various investments, such as mutual funds, ETFs, stocks, bonds, and GICs, allowing for potential growth.

• Timeframe

  • The account can remain open for up to 15 years.

  • If unused for a home purchase, funds can be transferred tax-free to an RRSP or RRIF, avoiding penalties.

• No Repayment Required

  • Unlike the Home Buyers’ Plan (HBP), withdrawals from an FHSA don’t need to be repaid.

 

Why the FHSA is Good

 

• Dual Tax Benefits

  • Immediate tax savings through deductible contributions and tax-free withdrawals.

• Increases Home-Buying Budget

  • Can be combined with the HBP, allowing Canadians to save more for a down payment.

• Flexibility

  • If the funds aren’t used for a home purchase, they can support retirement savings.

• Encourages Long-Term Saving

  • Tax-advantaged growth allows your investments to compound faster.

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Considerations

 

• Restricted Use

  • Funds must be used for a qualifying home purchase; otherwise, withdrawals are taxed unless transferred to an RRSP or RRIF.

• Contribution Limits

  • The annual and lifetime caps may not fully cover savings needs for expensive housing markets.

• Eligibility Criteria

  • Only first-time buyers qualify, and the account must be closed after 15 years or upon turning 71.

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Who Should Use an FHSA?

 

• First-Time Home Buyers: Canadians planning to purchase their first home within the next 15 years.

• Individuals Who Maximize RRSP/TFSA Contributions: Adds another tax-advantaged vehicle for saving.

• Young Adults Starting to Save: Offers flexibility for home buying or retirement savings if plans change.

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The FHSA is a valuable tool for Canadians, combining tax benefits and flexibility to help make homeownership more attainable while encouraging disciplined savings habits.

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To get more details as regards opening an account, investments in your FHSA, withdrawals , tax deductions etc....please review and refer to the CRA resource pages 

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You can track your FHSA contribution room with the CRA, and review transactions within your FHSA using the CRA My Account portal. 

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• Logging into the Canada Revenue Agency's (CRA) My Account self-service portal

• Contacting the CRA at 1-800-267-6999,

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You can log in to the CRA My Account portal using your bank information or directly through the CRA. If you don't have an account, you can register and follow the instructions.