Buying your first home: The First Home Savings Account (FHSA)
A first home savings account (FHSA) is a registered plan that allows you to save for your first home, tax-free (up to certain limits).
The FHSA is a game-changer for Canadian residents interested in buying their first home. The program started on April 1, 2023, and is a great way to save for your first home. Contributions to a FHSA are tax-deductible, allowing you to maximize your savings. What sets the FHSA apart from an RRSP, is that your withdrawals are tax-free; resembling the flexibility found in a Tax Free Savings Account.
The FHSA comes with an annual tax-deductible contribution limit of $8,000, with a lifetime maximum of $40,000. Unused contribution room can be carried forward to the following year, up to a maximum of $8,000.
How long do you have to use your FHSA?
Funds in your FHSA must be used by December 31st of the 15th year, or the year you turn 71 years old, whichever comes first. We recommend anyone who is interested in buying a home, start early. The earlier you start, the more compounded value you will receive from your investment.
Who Qualifies for a FHSA?
To quality to open an FHSA, you must meet all of the requirements:
18 Years of Age
Not older than 71 years of age, as of December 31st
A Canadian resident
A first time home buyer.
Withdrawing from your FHSA
A qualifying withdrawal is a withdrawal from your FHSA where all of the following conditions are met:
you must fill out Form RC725, Request to Make a Qualifying Withdrawal from your FHSA and give it to your FHSA issuer.
you must be a first-time home buyer
you must have a written agreement to buy or build a qualifying home with the acquisition or construction completion date of the qualifying home before October 1 of the year following the date of the withdrawal
you must not have acquired the qualifying home more than 30 days before making the withdrawal
you must be a resident of Canada
you must occupy or intend to occupy the qualifying home as your principal place of residence within one year after buying or building it.