Are you saving for your first home? We all know that buying a home can be challenging and stressful, especially for first-time home buyers. The exciting news is there is a new registered plan called the First Home Savings Account (FHSA) to help Canadians save for their first home. The best part? It’s tax-free! Yes, you’ve heard that right.

Now, let’s discuss everything you need to know about the FHSA. We’ll also cover some FAQs, including:

  • Where can I open an FSHA?
  • Does the FHSA come with a time constraint?
  • When should I close an FSHA?
  • Is it possible to withdraw from an existing FHSA if you’re a non-resident anymore?

Let’s dive in!

What Exactly is an FHSA?

The FHSA was first introduced in the 2022 federal budget, allowing Canadian residents to generate tax-free returns. It combines the elements of a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP), giving contributors the benefit of tax-free withdrawals and tax-deductible contributions. However, the money can only be withdrawn tax-free when purchasing a home.

Eligibility Requirements

  • Must be a resident of Canada.
  • At least 18 years old and not turning 72 in the year of application.
  • Must be a first-time home buyer.
  • Your common-law partner or spouse does not own a home that has been your principal residence during the past four years.

Now, let’s talk about numbers.

There are a couple of limits to keep in mind. The yearly contribution limit is $8,000, with any unused portion carried forward. For example, if you open an FHSA and contribute $4,000 in 2023, you can contribute up to $12,000 in 2024. The lifetime contribution limit is $40,000, representing about 5-6% of the average home price in Canada.

Important Reminders

  • While you can have more than one FSHA, your total contribution cannot exceed the lifetime and annual limits.
  • The contribution amounts are not adjusted for the cost of living or inflation.
  • Once you withdraw funds to purchase a home, you’ll need to close all your FHSA accounts by the end of that year.
  • You can only use the FHSA to purchase a property once.

FHSA Qualifying Withdrawals and Transfers

Qualifying withdrawals are tax-free if you’re going to purchase your first home. However, to qualify, these conditions should be met:

  • You must be a first-time buyer and a resident in Canada at the time of the withdrawal.
  • The qualifying home must be located in Canada.
  • Have a written agreement to build or buy a qualifying home before October 1 of the following year and occupy the property a year after building or buying it.

Take note; the remaining funds can be transferred to an RRIF or RRSP tax-free until December 31 of the following year of the qualifying withdrawal.

FHSA vs Home Buyers’ Plan (HBP): What’s the Difference?

FHSA and HBP withdrawals can be used to purchase a home. However, HBP withdrawals are borrowed interest-free from your RRSP and must be paid within 15 years. On the contrary, FHSA-qualified withdrawals are tax-free and do not require repayment. If you haven’t purchased a home within the 15-year FHSA limit, your funds will be transferred to your RRSP before the end of your 15th year. By this time, the funds can be withdrawn under the HBP.

Funds transferred from an FHSA to an RRSP don’t lessen your available RRSP contribution room. This means that by contributing to your FHSA, you can effectively create additional space in your RRSP.


Where can I open an FSHA?

Starting in 2023, you can avail yourself of the FHSA from credit unions, banks, or any insurance or trust companies that issue RRSPs and TFSAs.

Does the FHSA come with a time limit?

Yes, the FSHA remains open for a maximum of 15 years. Beyond that timeframe, the funds in your account must be used to purchase a home or be transferred to an RRIF or RRSP. You will have the option to withdraw the funds, but they will be subject to withholding tax.

When should I close an FSHA?

You should close your FHSA whichever of the following occurs first:

  • On your 15th year of having the FHSA
  • By the end of the year, when you’ll turn 71 years of age.
  • The year wherein you made the first qualifying withdrawal.

It’s necessary to close your FHSA account to avoid unintended tax consequences.

Is it possible to withdraw from an existing FHSA if you’re a non-resident anymore?

Did you just move from Canada? You can continue contributing to your FHSA. However, for a qualifying withdrawal, you need to be a current resident of Canada. Otherwise, non-qualifying withdrawals are subject to withholding tax.

Wrapping Things Up

The FHSA offers Canadians a valuable opportunity to save towards the purchase of their first home. While particular rules and time limits are associated with the FHSA, it remains a beneficial tool for first-time homeowners.

Happy saving and house hunting!