FHSA: Tax-free First Home Savings Account

These registered accounts to help individuals save for their first home, were introduced in the April 2022 federal budget, and are now available. They are available to residents of Canada, at least 18 years of age, who not have lived in a home that they owned in at least the preceding 4 calendar years of the year the account is opened. Contributions of up to $8,000 are tax-deductible annually, and unused annual contribution room cannot be carried forward. There is a lifetime contribution limit of $40,000. Growth in the account is not taxed. Withdrawals to purchase a home are non-taxable but other withdrawals are taxable. Funds must be used for a qualifying first home purchase within 15 years of first opening an FHSA at which point the account must be closed. Any remaining funds would have to be withdrawn (and taxed) or transferred tax-free to an RRSP or RRIF. Such a transfer would not be considered a contribution so does not require or affect your RRSP contribution room. You can transfer funds tax-free from an RRSP or RRIF to a FHSA subject to the annual and lifetime contribution limits of the FSHA.

You cannot make both an FHSA withdrawal and a Home Buyers' Plan (HBP) withdrawal in respect of the same qualifying home purchase.

FSHA accounts can be opened in the future and if so, have zero balance now, but you can set up the portfolio of investments you plan to invest in in the future. Enter the date the account was or will be opened, cumulative contributions, and the current year's contribution if made. You will need to update this any time a contribution is made and at the beginning of every year.

When you set up a principal residence or principal residence with rental suites to be bought in the future, and have not checked the `use HBP' box, the program will check to see if there have been any FSHAs entered. Please edit any previously entered REAL ESTATE entries that you now want to be considered to be used with the FHSA. If FHSAs were entered for both spouses, the property owner should be set to `Joint' to link all of the FSHA accounts. When the program links the property to any FSHAs entered, you will get a notice to check the TIME MACHINE results in FUTURE dollars for the year of the home purchase. The TIME MACHINE will take the full balance of the FHSAs on the date of purchase as a downpayment on the property, and will also pay any CMHC fees if any, based on that downpayment. The Warnings column will show you those amounts, and show you the amount left for which you can add a mortgage in LOANS (use the FUTURE dollars amount), to start the day of purchase.

If you were previously saving money in your RRSP and planning to use the HBP for your first home purchase, you can transfer the funds to the FSHA in yearly up to $8000 increments. You will not get an additional tax deduction, but once the funds are in a FHSA, they can be withdrawn tax-free for your home purchase and do not need to be repaid to the RRSP. You can set up such a transfer in the MoneyReadyApp using 2 entries AUTOMATIC Savings/Withdrawals. The first entry would be for example $-8000 withdrawal from the RRSP with a start date of Jan 1 of the year you want to start (usually the year the FHSA is opened) and an end date Dec 31 5 years later, and another entry of $+8000 with the same start and end dates to force a deposit to the FHSA.

More on using the FHSA or the HBP to buy a principal residence can be found on the Add/Edit Real Estate Help page .