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Tax-Free First Home Savings Account, Explained

5 minute read

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What you should know...

  • The First Home Savings Account (FHSA) is a new tax-free savings vehicle introduced in the 2022 Federal budget to assist eligible Canadian residents in purchasing their first home.
  • We’ve developed this article for information purposes only. Information about FHSAs is based on what is currently available from the Canadian government and may be subject to change.
  • The Government expects that Canadians will be able to open and contribute to an FHSA at some point in 2023. We are currently reviewing the requirements to determine when the FHSA will be available to our members.

Are you dreaming of purchasing your first home? Then you're probably familiar with the emotional rollercoaster of trying to break into the market to get your dream home. One of the most significant barriers to becoming a homeowner: saving enough for a down payment.

In an effort to help more Canadians enter the housing market, the Government of Canada introduced a new registered plan through its 2022 budget, called the Tax-Free, First Home Savings Account (FHSA). Through the new account, prospective home buyers can save up to $40,000 tax-free for the purchase of their first home. The FHSA is packed with powerful benefits that can help you save faster than ever before and will come into effect at some point in 2023.


Here’s a closer look at 7 commonly asked questions about the FHSA:

  1. What is an FHSA?
  2. Who is eligible for the FHSA?
  3. What are the top benefits?
  4. What can I withdraw the money for?
  5. What happens if you don't buy or build a new home?
  6. Can I have a real life example?
  7. Where can I learn more?

1. What, exactly, is an FHSA?

The FHSA is a registered plan designed to help first-time homebuyers save for a down payment. It combines the very best features of a registered retirement savings plan (RRSP) and tax-free savings account (TFSA).

  • Annual FHSA contribution limit: $8,000 | Lifetime FHSA contribution limit: $40,000
  • Like an RRSP, contributions made to an FHSA are tax-deductible
  • As with a TFSA, no taxes are paid on withdrawals made to purchase an eligible first home

There are also certain duration requirements for the FHSA. Accounts can stay open:

  • For maximum of 15 years
  • Until the end of the year that an individual turns 71
  • Until the end of the year following the year a qualifying withdrawal for a home purchase is made

2. Who is eligible for the FHSA?

To open an FHSA, you must be:

  • A resident of Canada as defined by the Government
  • Between the ages of 18 – 71 years; You must be the age of majority in your province of residence (19 years old in British Columbia)
  • A first-time home buyer, meaning: you must not have lived in a home you owned in the year the FHSA is opened, or during the preceding four calendar years.

3. What are the top benefits?

The FHSA has a few powerful incentives:

  1. It offers tax-sheltered savings. The FHSA allows you to save for a down payment tax-free for up to 15 years. Since investment earnings aren’t taxed, savings can grow faster than a traditional savings account—expediting the time it takes to reach your goals.
  2. Contributions are tax deductible. As contributions are deductible from your income, it can lower your annual tax bill or even increase your tax return each year.
  3. Ability to transfer funds from an FHSA to an RRSP or Registered Retirement Income Fund (RRIF). Transfers from the holder’s FHSA to an RRSP or RRIF in their name can take place on a tax-deferred basis and does not affect the holder’s RRSP contribution room.
  4. Ability to use the FHSA and Home Buyers’ Plan together in respect to the same qualifying home purchase. As an example, two individuals purchasing a home together, could mean up to $150,000 towards a down payment with these two government programs.

4. What can I withdraw the money for?

An account holder must meet certain conditions to withdraw money tax-free. You must:

  • Be a first-time home buyer and a resident of Canada at the time of the withdrawal
  • Have a written agreement to buy or build a qualifying home located in Canada before October 1 of the year following the withdrawal
  • Intend to occupy the qualifying home as your principal residence (not an investment or leisure property) within one year of buying or building it

When funds are withdrawn, FHSA contribution room is not reinstated

5. What happens if you don’t buy or build a new home?

Change happens. So, what do you do if your circumstances shift, and you no longer need to purchase or build a home?

You can transfer any savings from your FHSA into a RRSP or RRIF. This transfer is done on a tax-free basis. Your savings are only taxed when they are withdrawn and not used for a first home purchase.

Once the money is withdrawn, it does not need to be repaid.


6. Can I have a real-life example?

7. Where can I learn more?

We’ve covered some of the most common questions about the FHSA in this piece. To learn more or check for updates, please visit the Tax-Free First Home Savings Account information page on the Government of Canada website.

In the meantime, start dreaming about your new home – with the FHSA, you’re one step closer to becoming a homeowner.

You are solely responsible for confirming that your FHSA, TFSA and RRSP contributions are within your allowable limits set by Canada Revenue Agency (CRA). All rules and contribution limits for FHSAs are set out by CRA and applicable legislation apply. Information about FHSAs is based on what is currently available from the Canadian government and may be subject to change.