Tax-Free First Home Savings Account (FHSA)

Frequently Asked Questions

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

  The Tax-Free First Home Savings Account (FHSA) is a registered account introduced in the 2022 Federal budget allowing eligible individuals to save and invest money on a tax-advantaged basis for the purchase of their first home.

• What Are the Tax Advantages of a FHSA?

  Contributions to a FHSA are tax deductions and withdrawals from a FHSA (to purchase a first home are non-taxable) – "tax-free in, tax-free out". In contrast, RRSP contribution are tax deductible, but withdrawals are taxed. Similarly, TFSA contributions are not tax deductible, but withdrawals are non-taxable. Therefore, the FHSA provides the tax advantages of both the RRSP and TFSA as it relates to the purchase of a first home.

• Who Can Open a FHSA?

  The eligibility requirements for an individual to open a FHSA are as follows:

  • Must be a Canadian resident.
  • Must be at least 18 years old.
  • Must not have lived in a home that they owned in the year the FHSA is opened or throughout any of the preceding four calendar years.
  • Must not have previously used a FHSA to purchase a home.

• When Will the FHSA Be Available?

  The Federal government plans to coordinate with financial institutions in order to make FHSA’s available in 2023 (to be opened and contributed to).

• How Much Can Be Contributed to a FHSA?

  The lifetime contribution limit is $40,000 per individual with an annual maximum contribution limit of $8,000. The lifetime contribution limit can be achieved over five (5) years of maximum annual contributions. Contribution room will be available and accrue beginning in 2023.

• Can Unused Annual FHSA Contribution Room Be Used in Subsequent Years?

  No. Unused annual contribution room is not carried forward. If you contribute less than the $8,000 annual maximum one year, your next year’s contribution limited would still only be $8,000.

• Can I Have More Than One FHSA?

  Yes. You can have multiple FHSA’s. However, all your FHSA’s would share the same annual and lifetime cumulative contribution limits.

• When Can I Withdraw from My FHSA?

  You can make non-taxable withdrawals for the purchase of a single property once in your lifetime. Additionally, you can transfer funds from your FHSA to your RRSP (registered retirement savings plan) or, if you are 71 or older, a RRIF (registered retirement income fund). Such transfers are not be taxable, but would be taxed when withdrawn from the RRSP or RRIF as usual. Also, such transfers are not related to your RRSP contribution room, meaning they are not limited by and do not reduce your RRSP contribution room. Withdrawals from your FHSA can be made for other purposes, but would then be taxed.

• What Happens If I Open a FHSA But Do Not Purchase a Home?

  If you have not used the funds in your FHSA to purchase your first home within (15) fifteen years of opening the account, your FHSA will be closed at which point you will have two options:

  • 1) You can transfer funds from a FHSA to a RRSP or RRIF (as outlined above in “When Can I Withdraw from My FHSA?”).
  • 2) You can withdraw funds on a taxable basis.

• Can I Transfer Funds from My RRSP to My FHSA?

  Yes. Subject to the annual and lifetime contribution limits of your FHSA, you can transfer funds from your RRSP to your FHSA. Note that you would lose this contribution room from your RRSP upon such a transfer.

• What Happens to My FHSA After Withdrawing?

  After making your non-taxable withdrawal(s) to purchase your first home, your FHSA must be closed within one year of the first withdrawal. You will not be eligible to open another FHSA.

• Can I Open a FHSA After the Age of 40?

  Originally, the Federal government had proposed a 40-year-old age limit on using a FHSA. However, this limitation was removed in the 2022 budget.

• Can I Use a FHSA Without Purchasing a Home?

  The current information provided by the Federal government does not include a mandate that FHSA contributions must be used for a home purchase, meaning that the FHSA could be used as a tax-deferral tool in theory. However, the government has previously cautioned that integrity measures will be put in place for the FHSA to deter tax avoidance.

• Can I Use Both the Home Buyers’ Plan and a FHSA?

  The Home Buyers’ Plan will continue to be available, but you cannot use both the Home Buyers’ Plan and withdraw from your FHSA for the purchase of the same home.