Quick Facts about the FHSA for Canadians

What is FHSA?
With rapidly rising house prices and higher mortgage rates, the dream of owning a first home feels like it is out of reach for many Canadians. Fortunately, the new First Home Savings Account (FHSA), could make saving for a first home easier. The FHSA is a registered plan that gives first-time homebuyers the opportunity to invest up to $40,000 for the purchase of a first home on a tax-free basis. Like a Registered Retirement Savings Plan (RRSP), contributions are tax-deductible, and withdrawals to purchase a first home—including from investment income—are nontaxable, like a Tax-Free Savings Account (TFSA).

How much can I contribute to a FHSA?

You can contribute $8,000 each calendar year. The lifetime limit on contributions is $40,000.
You can claim an income tax deduction for contributions made each tax year. Unlike RRSPs, contributions made within the first 60 days of a given calendar year are not attributable to the previous tax year.
For tax purposes, FHSA contributions can be carried forward and deducted in a later tax year.
Once you open the FHSA, the contribution room will appear on your notice of assessment.

What is my contribution room?

Unlike a TFSA, you do not accumulate contribution room if your FHSA has not yet been opened.
If you withdraw money from your FHSA unrelated to a home purchase, this contribution room is not reinstated
the following year.
You can carry forward any unused portions of your annual contribution limit. For example, if you contribute $5,000 in year one, you can contribute the unused amount of $3,000 in year two, in addition to your annual contribution limit of $8,000 for a total of $11,000 in year two.
Your carry forward amount must not exceed $8,000 and you cannot contribute more than $16,000 in the same calendar year. For example, if you contribute $1,000 in year one and $1,000 in year two, you can only contribute $16,000 in year three.

What if I contribute more than my limit?

If your contribution exceeds your annual limit, you are subject to a 1% tax per month. This means if you contribute $9,000 in September of year one, you will pay 1% of $1,000 per month until January of year two.

What is a qualifying withdrawal?

You must have a written agreement to buy or build a home in Canada by October 1st of the year after you make the withdrawal.
You must intend to live in the home as your principal residence within a year of buying or building it.
All FHSA funds may be withdrawn on a tax-free basis in a single withdrawal or a series of withdrawals. There is an exception that allows you to make qualifying withdrawals within 30 days of moving into your home.

Further Learning
To learn more about the FHSA, visit the CRA website via https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html