The First Home Savings Account (FHSA)
The most powerful way to save for your first home in Canada, explained simply.
The quick version
The FHSA is a registered account to help you save for your first home.
Contribute up to $8,000 a year, to a lifetime max of $40,000.
Contributions are tax-deductible, like an RRSP.
Growth and qualifying withdrawals are tax-free, like a TFSA.
You can use it together with the Home Buyers' Plan (HBP).
Not sure how the FHSA fits into your plan? Book a call and I will help you map out your down payment strategy.
What is an FHSA?
The FHSA is a government-registered account designed to help first-time buyers save for a home. It combines the best parts of an RRSP and a TFSA: you get a tax deduction when you put money in, and you pay no tax when you take it out to buy your first home.
Can I open one?
You can open an FHSA if you are:
A resident of Canada
At least 18 years old (and no older than 71)
A first-time home buyer: you have not lived in a home that you, or your spouse or common-law partner, owned at any time this year or in the previous four calendar years
Buying with a partner? You can each open your own FHSA. That is up to $80,000 together.
How does it work?
Step 1: Open your FHSA
Open one at your bank, credit union or investment platform. Your contribution room only starts the year you open it, so open it early, even if you can only put in a little.
Step 2: Contribute
Put in up to $8,000 a year. Inside the account, you can hold savings, GICs or investments, depending on your timeline and comfort level.
Step 3: Claim your deduction
Your contributions lower your taxable income. You can claim the deduction the same year, or save it and carry it forward to a future year when your income is higher.
Step 4: Withdraw for your home
When you buy your first home, take the money out tax-free.
Numbers to know
$8,000: annual contribution limit
$8,000: maximum unused room you can carry forward to the next year (so up to $16,000 in one year)
$40,000: lifetime contribution limit
15 years: how long you can keep the account open (or until the end of the year you turn 71)
$0: tax on qualifying withdrawals
Rules for a tax-free withdrawal
You are still a first-time home buyer when you withdraw
You have a written agreement to buy or build a home in Canada before October 1 of the year after your withdrawal
You plan to live in the home as your principal residence within one year
FHSA plus the Home Buyers' Plan
You can use both for the same home. The HBP lets you borrow up to $60,000 from your RRSP for your first home, and you pay it back over time. Your FHSA withdrawal never has to be paid back.
Used together, an individual could put up to $100,000 toward a first home, and a couple up to $200,000.
What if I do not buy a home?
No problem. You can transfer your FHSA to your RRSP or RRIF tax-free, and it will not use up your RRSP contribution room. If you withdraw for anything other than a qualifying home, that withdrawal is taxable.
Is it worth it?
For most first-time buyers, yes. The FHSA is one of the best tax breaks available, and opening it early gives your savings more time to grow.
Tax rules can change, and your situation is unique. Check with your accountant or financial advisor about how the FHSA fits your overall financial plan.
Let us build your plan together
Your FHSA is one piece of the puzzle. I will help you see how it fits with your down payment, closing costs and pre-approval, so you know exactly what you need and when. Book a call and let us get started.
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