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Everything you need to know about the First Home Savings Account.

The First Home Savings Account (FHSA) is a new registered account you can use to save tax-free towards the purchase of your first home. In this article, we’ll break down everything you need to know about the FHSA, including what it is, how it works, and who is eligible to use it.

What is the First Home Savings Account(FHSA)?

The FHSA is a new registered account introduced by the Government of Canada that can help you save tax-free towards the purchase of your first home in three main ways:

  • Contributions to your FHSA are tax-deductible, helping you lower your taxable income for the year;
  • The interest you earn and the growth you enjoy from funds you’ve invested in your FHSA won’t be taxed either. That means you can save more and will have more available when you want to purchase your first home; and
  • Qualifying withdrawals you make towards the purchase of your first home are tax-free, too. You can learn more on what qualifies here.

How does the FHSA work?

Your FHSA helps you keep your home ownership goals on track by letting you earn tax-free income from investments you hold in the account. Here’s how:

  • Make tax-deductible contributions up to $8,000 annually, to a lifetime maximum of $40,000. If you don’t contribute the full $8,000 in a single year, the balance can be carried forward for one year and added to the next year’s contribution limit.
  • Build on your contributions with tax-free growth. Your funds and any investment earnings can stay in the FHSA and grow tax-free with every contribution you make until you’re ready to buy your first home.
  • Carry forward contribution room, but only for one year.

It’s important to note that your FHSA will not remain open indefinitely. It will close on December 31st of the year in which either:

  • The 15th anniversary of your FHSA opening passes, or
  • When you turn 71.

The funds you’ve saved in your FHSA can be transferred to either your Registered Retirement Savings Plan (RRSP) or your Registered Retirement Income Fund (RRIF).

Can the FHSA be used for other expenses?

Yes, your FHSA can be used for other expenses, but doing so can be costly. If you need to make an FHSA withdrawal for anything other than the purchase of your first home, you will be taxed on that amount (much like withdrawing funds from an RRSP).

Can my FHSA be used with the RRSP Home Buyers’ Plan?

Yes, you can use your FHSA alongside your RRSP savings for the Home Buyers’ Plan. Your FHSA will not affect your eligibility for that program.

Who is eligible for the FHSA?

Once the FHSA becomes available, you can open one if you are:

  • 71 years old or younger, and age of majority in your province
  • A Canadian resident with a valid Social Insurance Number (SIN) and
  • A first-time homebuyer

All of these requirements, which you can learn more about in more detail here, must be met before you can open your FHSA.

What sorts of investments can be held in the FHSA?

Any investments you’re currently able to hold in a Tax-Free Savings Account (TFSA) are allowed in your FHSA. Coast Capital offers investments to the FHSA such as deposit products that carry interest, including cash savings and Guaranteed Investment Certificates (GICs). We also work with our partners at Worldsource Financial Management Inc. to offer mutual fund investments for your FHSA, as well.

We can help.

Everyone’s financial situation is unique. The financial advice you receive should be unique, too. Speak with a Coast Capital Advisor to find out more about the FHSA. We’ll take the time to understand your unique needs and goals and help you craft a plan for achieving them. Visit a Coast Capital branch or call us at 1.888.517.7000.

The stuff we have to say.
This article is provided for general information purposes only. It is not to be relied upon as financial, tax, or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, fees, and other investment factors is subject to change without notice and Cost Capital Savings Federal Credit Union is not responsible for updating this information. All third-party sources are believed to be accurate and reliable as of the date of publication and Coast Capital Savings Federal Credit Union does not guarantee the accuracy or reliability of such sources. Readers should consult their own professional advisor for specific financial, investment, and tax advice tailored to their needs to ensure that individual circumstances are considered properly, and action is taken based on the latest available information.
Coast Capital Savings Federal Credit Union provides advice and service related to deposit, loan and mortgage products. Coast Capital Wealth Management Ltd. provides investment and financial planning services. Coast Capital Financial Management Ltd. provides advice and service related to segregated funds, annuities and life insurance products. Worldsource Financial Management Inc. provides advice and service relating to mutual funds. Mutual fund values change frequently and past performance may not be repeated. Commissions, trailing commissions, management fees and expenses may all be related with mutual fund investments. Important information about mutual funds is contained in the relevant fund facts and simplified prospectus. Please read the fund facts carefully before investing.

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