The New Tax-Free First Home Savings Account

By Mateo Michalec

The government of Canada is introducing a new registered plan account called the Tax-Free First Home Savings Account (FHSA) in 2023. This could be a good option for those that are looking to specifically save for their first home. The FHSA will have an annual contribution limit of $8,000 and a lifetime limit of $40,000. While we do not have an official start date of the FHSA in 2023 the government will allow you to contribute the full $8,000 for the year regardless.


The account will almost be like a hybrid between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP).  Contributions to the FHSA will be tax-deductible just like a RRSP but withdrawals to purchase your first home will be non-taxable including investment income just like a TFSA. The FHSA will be permitted to hold the same qualified investments that RRSP’s and TFSA’s currently can such as stocks, ETF’s, mutual funds, government and corporate bonds, and GIC’s.


To open a FHSA, you must be a resident of Canada and at least 18 years old. A first-time home buyer is someone that has not previously owned a home in which they lived at during any part of the calendar year before the account is opened or the preceding 4 years. The account must be closed after 15 years on the anniversary of the account opening or if you turn 71.  If you have not purchased a qualifying home in that time frame you are able to move the funds on a tax-free basis to a RRSP. You may withdraw funds for any other reason, but funds will be taxable the year of the withdrawal.


A few other things to consider is that unlike an RRSP contributions the FHSA contributions for the first 60 days are not tax deductible for the previous tax year. You are allowed to carry forward unused portions of the annual FHSA contribution limit up to a maximum of $8,000 with the exception that you must have a FHSA open to accumulate carry-forward amounts.


The FHSA is a great account for someone that is truly looking to buy their first home. The fact that you can move funds over to your RRSP if you decide not to purchase a home is also a great alternative.


We’d love to discuss if this account is right for you and any other questions you may have on the FHSA.

Interested in discussing the FHSA?


Contact Mateo to book a free no-obligation consultation to learn more.

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