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 or construction of their first home.

• What Are the Tax Advantages of a FHSA?

  Contributions to a FHSA are tax-deductible, and withdrawals (to purchase a first home) are non-taxable – "tax-free in, tax-free out". A FHSA allows tax-deductible contributions of up to $8,000 per year, up to a lifetime maximum of $40,000. In contrast, RRSP contributions 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 between 18 and 71 years old.
  • Must not have lived in a home that you (or your spouse) owned in the year the FHSA is opened or throughout any of the preceding four calendar years.

• 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. You are allowed to roll over any unused FHSA contribution room into the next year, up to a maximum of $8,000.

  For instance, if you contributed only $6,000 in one year, you could carry forward the remaining $2,000 contribution room ($8,000 – $6,000 = $2,000) into the following year. Combined with the new annual limit of $8,000, this would give you a total contribution limit of $10,000 ($8,000 + $2,000 = $10,000) for that year.

• Can I Have More Than One FHSA?

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

• When Can I Withdraw from My FHSA?

  You can make tax-free withdrawals from your FHSA if you meet all the qualifying conditions. To qualify, you must be a first-time home buyer (not having owned or lived in a home you owned during the current or previous four calendar years, except the 30 days before withdrawal). You need a written agreement to buy or build a qualifying home, with the completion date before October 1 of the year after the withdrawal. The home must not have been purchased more than 30 days before the withdrawal, and you must intend to live in it as your principal residence within a year of buying or building it. You must also be a Canadian resident from the time of withdrawal until the home is acquired or until your death.

• 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 fifteen (15) years of opening the account or by the year you turn 71 (whichever comes first) your FHSA must be closed. At that point, you will have two options:

  • You can transfer funds to a RRSP or RRIF on a tax-free basis without impacting your RRSP contribution room.
  • 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 and instead a 71-year-old age limit was introduced. This means that you can open a FHSA at any age between 18 and 71.

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

  The Home Buyers’ Plan (HBP), which lets first-time home buyers withdraw up to $35,000 from their RRSP to purchase a first home, is still available. If you qualify, you can use both an FHSA withdrawal and an HBP withdrawal for the same home purchase.