Tax-Free First Home Savings Account

The tax-free first home savings account offers first-time home buyers the ability to save $40,000 tax-free. The FHSA includes many of the features of RRSPs and TFSAs.

• Contributions to a FHSA are tax deductible (like an RRSP)
• Income and gains inside a FHSA, as well as withdrawals, will be tax-free (like a TFSA) when the fund is used to purchase a qualified home for the first-time home buyer.
• Similar to a RRSP, you can make a contribution but defer the deduction until a later year.

The government expects that Canadians will be able to open and contribute to an FHSA at some point in 2023. Whenever this happens in 2023, Canadians will be allowed to contribute the full $8,000 annual limit in that year.

Am I eligible for the FHSA?

To open a FHSA account, you must:

• Be at least 18 years of age
• Must be a first-time home buyer, meaning that you have not owned a home in which you lived 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

How much can I contribute?

You can contribute up to $40,000 over your lifetime and up to $8,000 in any one year, including 2023.

You may carry forward your unused annual contribution amount to use in a later year. For example, if you open a FHSA in 2023 and contribute $5,000, you can contribute up to $11,000 in 2024.

Carry-forward amounts do not start accumulating until after you open a FHSA.

How to qualify to withdraw from the FHSA tax-free.

In order for an FHSA withdrawal to qualify as a non-taxable withdrawal, these conditions must be met:

1. A taxpayer must be a first-time home buyer at the time a withdrawal is made. Specifically, the taxpayer cannot have owned a home in which they lived at any time during the part of the calendar year before the withdrawal or at any time in the preceding four calendar years.
2. The taxpayer must also have a written agreement to buy or build a qualifying home before October 1 of the year following the year of withdrawal, and intend to occupy the qualifying home as their principal place of residence within one year after buying or building it.
3. A qualifying home would be a housing unit located in Canada.

If you meet the qualifying withdrawal conditions, the entire amount of FHSA funds may be withdrawn on a tax-free basis in a single withdrawal or a series of withdrawals.

Withdrawals that that do not qualify must be included in your tax return as taxable income. Financial institutions will be required to collect and remit withholding tax on non-qualifying withdrawals, consistent with the treatment applicable to taxable RRSP withdrawals.

Can I Transfers my FHSA to a RRSP?    

You can transfer funds from a FHSA to another FHSA, a RRSP or a RRIF on a tax-free basis.

These transfers would not reduce, or be limited by, an individual’s available RRSP contribution room.

You will also be allowed to transfer funds from a RRSP to a FHSA on a tax-free basis, subject to the FHSA annual and lifetime contribution limits and the qualified investment rules.

After you make a qualified withdrawal, you can transfer any unwithdrawn savings on a tax-free basis to a RRSP or RRIF until December 31 of the year following the year of their first qualified withdrawal.

How the FHSA affect the Home Buyers’ Plan (HBP)

The HBP will continue to be available under existing rules. However, an individual will not be permitted to make both an FHSA withdrawal and a HBP withdrawal for the same qualifying home purchase.