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Tax-Free First Home Savings Account (FHSA)

Effective January 1, 2023, a resident of Canada who is age 18 or older and did not live in a home in Canada which qualifies as a principal residence in the preceding four years is eligible to open up a tax-free First Home Savings Account (FHSA).  The lifetime contributions to an FHSA is $40,000 with an annual contribution limit of $8,000 per year and will be deductible for income tax purposes.   If an individual did not make a maximum contribution in a given year since the FHSA was opened, the maximum contribution in a current year will be limited to the annual contribution room available of $8,000 plus any unused contribution room from the preceding year.  

The annual contribution period for an FHSA is from January 1st to December 31st. This means that a contribution to an FHSA must be made by December 31st, 2023 to have the contribution be deducted on an individual’s 2023 personal income tax return.  This differs from an RRSP where contributions can be made within the first 60 days of the following year.

A tax-free withdrawal from the FHSA can be made if there is a written agreement to buy or build a home by October 1 of the following year.  An individual must intend to occupy the home as a principal residence within one year after purchase or completion of build.  Should these conditions be met, the withdrawals from the FHSA will be non-taxable. 

An FHSA has a maximum participation period for which an account can remain open, which ends at the end of the year following the earliest of the following events:

  • the 14th anniversary of the date the account was opened,
  • the year the individual turns age 70, or
  • the individual first makes a qualifying withdrawal from the FHSA for a purchase or build of a home.  

A transfer from a FHSA can be made on a tax-free basis to a RRSP or RRIF.  Any transfers to a RRSP will not affect an individual’s existing RRSP contribution room.  A transfer out of the FHSA will not result in a restoration of previously made FHSA contributions.