Program

A first home savings account (FHSA) is a registered account that allows first-time homebuyers, to save tax-free, within limits, for a qualifying first home tax-free with limits.

Details

Similar to an RRSP, a FHSA reduces your taxable income when you contribute, and the growth within the FHSA is tax-free.

Like a TFSA and RRSP, withdrawals made from the FHSA are tax-free when used towards your first home (including any capital gains), without any payback requirements.

Qualifications

There are several requirements to qualify for an FHSA. You’re considered a first-time homebuyer if you’re a Canadian resident aged 18-71 who didn’t live in a home that you or your spouse owned in the last four years.

You are not considered a first-time homebuyer if you intend to purchase an investment property.

Contributing to an FHSA

You can contribute up to $8,000 annually to a FHSA up to a maximum of $40,000. Every year you gain contribution room in your FHSA. Once you open the FHSA, you can use it for up to 15 years. After that time, it must be closed. If you don’t buy a home, any unused savings in your FHSA may be transferred to an RRSP; it can also be withdrawn as taxable income.

If, in the year you open your first FHSA, the total of your contributions to your FHSAs, or transfers from your RRSPs to your FHSAs, is less than $8,000, you will have unused FHSA participation room.

There is a one year carry over period for unused contribution room which resets every year on December 31.

Overcontributions

If you contribute over your allowed FHSA participation room in any given year you will have to pay a tax penalty of one per cent per month on the highest excess FHSA amount in that month. The monthly one per cent tax will continue until you eliminate the excess FHSA amount.

Withdrawing Funds

If you meet all of the conditions for a qualifying withdrawal to use your FHSA toward your home purchase, you can withdraw all funds from your FHSAs tax-free. If you don’t end up buying a home, you can transfer the money to an RRSP without affecting your RRSP contribution room.

Closing your FHSA

Your maximum participation period begins when you open your first FHSA and ends on December 31 of the year in which the earliest of the following events occur:

• the 15th anniversary of opening your first FHSA;
• you turn 71 years of age;
• the year following your first qualifying withdrawal from your FHSA.

In order to avoid unintended tax consequences, you should close all of your FHSAs before your maximum participation period ends.

Note:
There is no tax impact on the withdrawals and growth from your FHSA when used towards the purchase of your first home. You can withdraw amounts from your RRSP under the Home Buyers’ Plan and make a qualifying withdrawal from your first home savings account (FHSA) for the same qualifying home, as long as you meet all of the conditions for each plan at the time of each withdrawal.

For more information on eligibility and what constitutes a qualifying withdrawals from a FHSA, please consult the official Government of Canada First Home Savings Account webpage.