The First Home Savings Account (FHSA) is one of the most powerful tools available to first-time homebuyers in Canada. Launched on April 1, 2023, the FHSA combines the best features of an RRSP and a TFSA — giving you a tax deduction on contributions and tax-free withdrawals for a qualifying home purchase.
How the FHSA Works
- Annual contribution limit: $8,000 per year
- Lifetime contribution cap: $40,000
- Carry-forward: Unused contribution room can be carried forward (up to $8,000)
- Tax deduction: Contributions are fully deductible from your income
- Tax-free growth: All investment gains within the account are tax-free
- Tax-free withdrawals: Qualifying withdrawals for a home purchase are completely tax-free
- No repayment required: Unlike the Home Buyers' Plan, you don't need to repay withdrawals
Who Qualifies
To open an FHSA, you must be:
- A Canadian resident
- At least 18 years old (19 in some provinces)
- A first-time home buyer (you haven't lived in a home you or your spouse owned in the current year or past four calendar years)
Combining FHSA with the Home Buyers' Plan
You can use both the FHSA and the Home Buyers' Plan (HBP) for the same home purchase. The HBP allows you to withdraw up to $60,000 from your RRSP (though this must be repaid over 15 years). Combined, a couple could access:
- FHSA: $40,000 x 2 = $80,000 (tax-free, no repayment)
- HBP: $60,000 x 2 = $120,000 (must be repaid)
- Total: up to $200,000 toward a down payment
Maximizing Your FHSA
If you're planning to buy within 3-5 years, start contributing now. Even if you're not ready to buy immediately, the tax deduction alone makes the FHSA worthwhile. Invest the funds in a diversified portfolio or high-interest savings, and let compounding work in your favour.
Ready to start your home-buying journey? Contact our team to discuss your options and timeline.