Saving for a Home with the Tax-Free First Home Savings Account (FHSA)

The Tax-Free First Home Savings Account (FHSA) is a powerful savings tool designed to help Canadians fund their first home purchase more efficiently. It combines the best features of the Registered Retirement Savings Plan (RRSP) and the Tax Free Savings Account (TFSA) to offer both tax-deductible contributions and tax-free withdrawals when used for a qualifying home purchase.

Additional Details: 

• If you don’t buy a qualifying home within 15 years, the FHSA must be closed. Remaining funds can be transferred tax-free to an RRSP or RRIF (even if you don’t have available contribution room), or withdrawn on a taxable basis. 

• Eligibility requires you to be at least 18 years old, a Canadian resident, and not have owned a home (or lived in one owned by your spouse) in the current or previous four calendar years. 

• First-time home buyers in Canada can use both the First Home Savings Account (FHSA) and the Home Buyers’ Plan (HBP) at the same time to purchase a qualifying first home. The funds from each program can be combined toward the down payment, maximizing the resources available for your first home. 

• The current Home Buyer Program allow you to withdraw up to $60,000 per individual from your RRSP. Funds withdrawn under this program must be paid back over the following 15 years. If you do not pay back 1/15^th of the amount each year, you will need to add that amount to your taxable income for that calendar year and pay any taxes owing. 

• Spouses can each use their own FHSA and their own RRSP (via HBP) toward the same property, under the same eligibility conditions. 

• First-time home buyers can obtain up to $1500 in tax relief as a non-refundable tax credit by claiming the Home Buyers’ Tax Credit for eligible home purchases. The credit can be split with your spouse or common-law partner as long as the combined total does not exceed $1,500.