Understanding Canada's First Home Savings Account (FHSA)
Understanding Canada's First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a registered plan introduced by the Canadian government to help first-time homebuyers save for their first home. Combining the benefits of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA), the FHSA offers unique advantages to Canadians aiming to purchase their first property.
Key Features of the FHSA
Eligibility Criteria
To open an FHSA, you must meet the following requirements:
- Be a Canadian resident aged 18 or older.
- Be a first-time homebuyer, meaning you have not owned a home in which you lived during the current year or any of the previous four calendar years.
For detailed eligibility information, visit the official Government of Canada website.
Contribution Limits
The FHSA has specific contribution limits designed to maximize your savings:
- Annual contribution limit: $8,000.
- Lifetime contribution limit: $40,000.
Unused contribution room can be carried forward to future years. For more details, visit the CRA page on contributions.
Tax Advantages
The FHSA offers:
- Tax-deductible contributions
- Tax-free investment growth
- Tax-free withdrawals for qualifying home purchases
Learn more on the CRA page on FHSA tax deductions.
Qualified Investments
Funds in an FHSA can be invested in:
- Mutual funds
- Stocks
- GICs
- Bonds
More info is available at the CRA investment guide.
Withdrawals and Transfers
Withdrawals are tax-free if you meet certain conditions. Otherwise, taxes may apply. Funds can also be transferred to other registered accounts like an RRSP or RRIF.
More on this at the CRA withdrawal and transfer guide.
Over-Contribution Penalties
Exceeding your FHSA limit may result in a 1% monthly penalty tax. Always track your contributions.
Read more at the CRA guide on over-contributions.
Closing Your FHSA
Your FHSA must be closed by:
- The 15th anniversary of opening it
- The year you turn 71
- The year after your first qualifying withdrawal
Learn more about this on the CRA page on closing your FHSA.
FAQ: First Home Savings Account (FHSA)
Can I open more than one FHSA?
You can open more than one FHSA, but your total contributions across all accounts must not exceed the annual and lifetime limits. Learn more here.
What happens if I don’t buy a home?
If you don't buy a home, you can transfer your FHSA funds to an RRSP or RRIF tax-free. Read about FHSA closing rules.
Can I use my FHSA and the Home Buyers’ Plan (HBP) together?
Yes. You can combine the FHSA and the RRSP Home Buyers’ Plan (HBP) to boost your down payment. Learn how.
Is there an FHSA calculator?
Yes, the CRA offers estimators to help you plan. Use the FHSA estimators here.
How do I report FHSA activities on my taxes?
You'll need to report your contributions, withdrawals, and transfers. See how to report.
Start Your Journey to Homeownership
The FHSA is a great step toward buying your first home in Canada. Use it wisely to make the most of your savings and tax benefits.
Looking for property listings or professional help? Visit our Real Estate Hub for homebuying support.
