Tax-Free Home Savings Account

One of the hurdles for a first-time homebuyer is to save enough money for a down payment, ancillary expenses, and reserve.  In 2022 the First Home Savings Account (FHSA) was approved by the federal government.  This is a tax-free contribution which should make this task a bit more appealing.

If there is a Home Buyer’s Plan (HBP) that will let you withdraw from an RRSP to purchase a home or for a relation that is disabled, both FHSA and HBP withdrawals are allowed.

Unlocking Homeownership

This is available to Canadian residents aged 18 or older who have not owned or co-owned a place of residence within the year the account was established or in the four years preceding the proposed purchase. This non-ownership provision extends to their spouse or common-law partner as well.  In fact, there are no provisions for a spousal FHSA. 

There are other restrictions. Only the individual who holds the FHSA can make contributions or take deductions.  You can contribute up to $8,000 per year to a lifetime limit of $40,000.  Qualifying deductions are not taxable, and income and capital gains are also tax-free. 

To withdraw funds:

  • Completion of a specific form that will include the location of the property and the buyers intent to hold it as a principal place of residence for at least one year.
  • Canadian residency from the point of funds withdrawal.
  • First-time home buyer. 
  • Have a written contract on the property for its purchase or construction to be complete before October 1 of the following year.
  • The buyer did not acquire the property more than 30 days prior to the withdrawal.

A FHSA will terminate:

  • On the 14th anniversary of its opening (or it can exist for a maximum of 15 years).
  • The FHSA owner turns 70.
  • The funds are withdrawn.

When the account ends, the funds can be transferred to an RRSP or RRIF, tax-free, with no impact on the individual’s contribution room.  The funds can also be withdrawn but will be taxable.  Any future income or gains are also taxable.

When the account is opened, the owner can carry forward any unused portions of the annual contribution up to $8,000.  Contributions made in the first 60 days of the year cannot be allocated to the previous tax year. Overcontributions will be taxed at 17% for each month (or part of a month) in which it occurs. As you can tell, this is an excellent method to save tax-free money in order to buy your first home.  However, you can also see that there are quite a few moving parts and hoops to be aware of.  If this sounds like a good opportunity for you, you probably want to start by checking with a company that deals with these arrangements on a regular basis, like  They can help you by answering any questions and helping you decide if this will be the best route for you or if there is another more advantageous method.