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Tax-Free First Home Savings Account (FHSA)

Are you a first-time home buyer trying to save up money for a home? The Canadian government has opened a new registered plan that allows you to save money tax-free. The Tax-Free First Home Savings account started on April 1, 2023, and allows you to put a certain amount of cash aside for purchasing a house.

Can I open an FHSA?

You may be curious if you are eligible to open a first home savings account. To qualify you must be a Canadian resident that is 18 years of age and a first-time home buyer. Another condition is that you need to be considered a first-time home buyer. This means you did not live in a qualifying home any time before the account was opened during the calendar year or at any time in the preceding four calendar years.

How much can I put in my FHSA?

You can put money in your FHSA by contributions or transferring from accounts like the registered retirement savings plan (RRSPs) for a total amount of $8,000 for the calendar year. If you have accidentally contributed too much you can also carry forward a maximum of $8,000 to the next year. You may also open more than one FHSA, but the total amount still cannot be more than the participation room of $8,000.

There are some limits to the account. Only one person can participate in the FHSA, your spouse or common-law partner cannot participate in the account. Since only one person owns the FHSA account, only the account holder can claim the tax deduction on income tax and benefit returns as well.

Do I live in a qualifying home for the FHSA?

This account only applies to housing in Canada and is limited to certain homes. For example, it must be family homes, townhouses, mobile homes, condominium units, and apartments. This account cannot be used for shares for rights to tenancy, land, non-residential properties, and vacation properties.

When will the FHSA account close?

When you open the FHSA account, the participation period is limited. The account can stay open for 15 years or the year when you turn 71. The account will also close when you make a qualifying withdrawal for the first home. Make sure to close all the FHSAs when the account is about to close so that there are no tax consequences. This can be avoided by directly transferring to RRSPs or Registered retirement income funds (RRIFs).

If you are considering opening a First Home Saving Account and want more details or have any questions, talk to one of our mortgage brokers today. We are here to take the stress out of home buying and mortgage concerns. Talk to a broker or book a consultation to see if you can apply for a Tax-free Savings Account or if you can apply for a mortgage.



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