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Funds withdrawn from a FHSA do not have to be paid back into your registered account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