The First Home Savings Account (FHSA) combines two of the most useful features of other registered accounts: contributions are tax-deductible, like an RRSP, and qualifying withdrawals to buy a first home are tax-free, like a TFSA.
Who can open one
You generally need to be a resident of Canada, at least 18 years old, and a first-time home buyer. For the FHSA, that broadly means you have not lived in a home that you or your spouse or common-law partner owned in the current year or the four previous calendar years. The CRA’s FHSA page sets out the full conditions.
How much you can put in
- Up to $8,000 a year, with a lifetime limit of $40,000.
- Unused room can be carried forward, up to a maximum of $8,000, so you could contribute up to $16,000 in a later year.
- Room only starts building once you open the account, so opening one early can help even if you contribute little at first.
How the money comes out
A qualifying withdrawal to buy a first home is tax-free, as long as you meet the conditions at the time. If you do not buy a home, you can generally transfer the balance to your RRSP or RRIF without using RRSP room, or withdraw it as taxable income.
How long it can stay open
An FHSA can generally stay open for up to 15 years, or until the end of the year you turn 71, whichever comes first. After that, any balance must be used for a qualifying purchase, transferred or withdrawn.
Using it with the RRSP and the Home Buyers’ Plan
Eligible buyers can use the FHSA and the RRSP Home Buyers’ Plan towards the same home. The Home Buyers’ Plan lets you borrow from your RRSP and repay it over time. The FHSA does not need to be repaid.
The short version
If you are a first-time buyer, the FHSA is often the first account to fund for a home, because it gives a deduction going in and tax-free money coming out. As with any registered account, check your available room with the CRA before you contribute.