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What Is an FHSA? (First Home Savings Account)
The First Home Savings Account (FHSA) is a registered investment account in Canada that allows eligible individuals to save toward the purchase or construction of their first home. It combines key advantages of both retirement and tax-free savings accounts:
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Similar to an RRSP: Annual FHSA contributions are tax-deductible.
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Similar to a TFSA: Qualified withdrawals used to purchase a first home are completely tax-free.
How Does It Work?
Annual Contributions: You can contribute up to $8,000 per year to your FHSA.
Lifetime Limit: The total lifetime contribution limit is $40,000.
Transfers from an RRSP: You may transfer funds from your RRSP into your FHSA; however, these transfers do not qualify for a tax deduction.
Withdrawals: Qualified withdrawals made for the purchase of your first home are completely tax-free.
Who Is Eligible to Open an FHSA?
You must meet all of the following criteria to open an FHSA:
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Be a resident of Canada.
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Be at least 18 years old.
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Qualify as a first-time homebuyer — meaning you have not owned a home you lived in during the year you open the FHSA or in the previous four calendar years.
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Be under 71 years of age.
Benefits of Investing in an FHSA
Tax Reduction: Annual FHSA contributions are tax-deductible.
Tax-Free Growth: Investment earnings inside the FHSA grow tax-free until withdrawal.
Tax-Free Withdrawals: Qualified withdrawals used to purchase your first home are completely tax-free.
Flexible Transfers: You may transfer your FHSA balance to your RRSP or RRIF without affecting your available contribution room.
Key Points to Keep in Mind
Annual Contribution Limit: Up to $8,000 per year.
Lifetime Contribution Limit: A maximum of $40,000 over your lifetime.
Tax Advantage: Contributions are deductible from your taxable income.
Investment Growth: All investment earnings grow tax-free inside the account.
Withdrawals: Tax-free withdrawals are only permitted when used to purchase your first home.
Balance Transfers: You may transfer your FHSA balance to an RRSP or RRIF.
Age Requirements: The account can be opened anytime from age 18 to 71.
First-Time Homebuyer Condition: You must not have owned a home you lived in during the current year or the previous four calendar years.