First Home Savings Account
The First Home Savings Account (FHSA), a new kind of registered savings plan, was created by the federal government in 2022. An FHSA is designed to help you accelerate your dream of home ownership by helping you save tax-free for your first home!
The First Home Savings Account (FHSA) is a new, tax-advantaged savings plan introduced by the Canadian government to help first-time homebuyers save for their dream home faster. It combines the tax-deductible benefits of an RRSP with the tax-free withdrawals of a TFSA — giving you the best of both worlds.
At iRateCompare, we help you understand, open, and manage your FHSA so you can take confident steps toward owning your first home.
Key Features of the FHSA
Designed for First-Time Homebuyers
You’re eligible if you haven’t owned a home in the current or previous four calendar years.
Annual Contribution Limit: $8,000
Up to a lifetime maximum of $40,000. Contributions are tax-deductible, reducing your taxable income.
Tax-Free Growth
Investment earnings within the FHSA grow tax-free — no tax on interest, capital gains, or dividends.
Tax-Free Withdrawals
Withdraw funds tax-free when used to purchase your first qualifying home in Canada.
Unused Room Carries Forward
If you don’t contribute the full $8,000 in one year, the unused room rolls over (up to $8,000/year).
15-Year Limit
You can keep the FHSA open for up to 15 years or until the end of the year you turn 71, whichever comes first.
How Does a First Home Savings Account (FHSA) Work?
The First Home Savings Account (FHSA) is a registered savings plan designed to help eligible Canadians save for their first home with tax advantages on both contributions and withdrawals.
1. You Open an FHSA
- Available to Canadian residents aged 18 to 71 who are first-time homebuyers (haven’t owned a home in the past four years).
- Can be opened at banks, credit unions, or investment firms.
2. You Contribute Up to $8,000/Year
- Annual contribution limit: $8,000
- Lifetime limit: $40,000
Contributions are tax-deductible, just like with an RRSP, which helps reduce your taxable income.
3. Your Investments Grow Tax-Free
- You can invest in mutual funds, GICs, stocks, ETFs, and more inside the FHSA.
- Any growth (interest, dividends, capital gains) is not taxed while it remains in the account.
4. You Withdraw Tax-Free to Buy Your First Home
- When you’re ready to buy a qualifying home, you can withdraw your FHSA funds tax-free, including both contributions and investment earnings.
- The home must be located in Canada and become your principal residence within one year of purchase.
5. Funds Can Be Transferred or Returned
If you don’t end up buying a home, you can:
Transfer FHSA funds tax-free to your RRSP or RRIF, without affecting your RRSP contribution room.
Or withdraw funds (taxable) if not used for a qualifying home purchase.
Why Use an FHSA?
- Save faster with tax savings on both ends (contributions and withdrawals).
- Combine with RRSP’s Home Buyers’ Plan (HBP) for more purchasing power.
- A smart, government-backed way to reach your homeownership goals.