Purtzki, Johansen + Associates


The First Home Savings Account (FHSA). What you need to know.

Starting in April 2023, the new First Home Savings Account will allow prospective homeowners at least 18 years of age to save up to $40,000 for their first home. You can contribute up to $8,000 each year to the FHSA. You must use these funds within 15 years of opening an FHSA.

To be eligible, you have to meet the following conditions:

  • a resident of Canada
  • at least 18 years of age
  • did not own a home in the year the FHSA was opened or during the previous four calendar years.

How does the FHSA compare to the TFSA and RRSP?

Like your TFSA, the maximum contribution of $40,000 ($8,000 per annum) will compound and grow tax-free. But unlike the TFSA, you don’t have the same flexibility in using your savings. The FHSA has to be devoted to the purchase of your first home. Any withdrawals not related to buying a home will not meet the criteria of a qualifying withdrawal and, therefore, will be taxed.

On the other hand, the contribution to the FHSA is tax-deductible, while the contribution to the TFSA is not.

You can withdraw up to $35,000 of your RRSP towards a new home (called the Home Buyer’s Plan) tax-free. The catch is that with the RRSP, you have to pay that money back within 15 years. With the FHSA, you won’t need to replace those funds.

What if I don’t intend to buy a home?

No problem. Contributions can be transferred into an RRSP/RRIF on a tax free basis without affecting the RRSP room in the account. Essentially the account can be used as a means of generating an additional $40,000 of RRSP for an individual.

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