What is the Tax-Free First Home Savings Account (FHSA)?

The Canadian government created a new registered account to make saving for your first home easier. The First Home Savings Account (FHSA), which was announced in the 2022 federal budget, is a tax-free account designed to help more Canadians become homeowners. 

This infographic summarizes some of the rules and benefits of a FHSA.

What is the Tax-Free First Home Savings Account (FHSA)?

The First Home Savings Account (FHSA) is a registered account with tax advantages. The objective is to help more Canadians get into the housing market.

Who is eligible?

  • Canadian residents 18+
  • Must not have owned a home in which you have lived in the previous four years before the account is open

What can I use the savings for?

  • Savings can only be used for the purchase of a primary residence
  • Cannot be used for investment or leisure properties

What are the contribution rates?

  • $8,000 yearly contribution limit
  • Lifetime contribution limit of $40,000
  • Unused contribution room can be carried forward indefinitely and deducted in a later tax year

What are its benefits?

  • The FHSA is completely tax-free!
  • Contributions to the FHSA are tax deductible which will lower your taxable income
  • Withdrawals are tax-free
  • Gains or profits made are tax-free

How is it different from the Home Buyer’s Plan

Home Buyer’s Plan (HBP)

  • Allows Canadian residents to withdraw tax-free funds up to $35,000 from their RRSP for their first home
  • You have up to 15 years to repay the funds back to your RRSP
  • Your repayment period starts the second year after your withdrawal

First Home Savings Account (FHSA)

  • Funds withdrawn from a FHSA do not have to be paid back into your registered account

What happens if I do not use the FHSA to purchase a first home?

  • Any withdrawals other than purchasing a first home will be considered taxable income
  • After 15 years of opening the account or when you turn 71 years old (whichever is earlier), it will need to be closed
  • Funds can be transferred on a tax-free basis to an RRSP or RRIF
  • Transfers will not be limited by your RRSP contribution room

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