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First Home Savings Account
The First Home Savings Account is a new federal program that helps Canadians save for their first home. It was introduced in 2022 and became available on April 1, 2023. The FHSA blends the best parts of an RRSP and a TFSA, giving you tax deductions on contributions and tax‑free growth on your investments.
You can contribute up to eight thousand dollars per year, with a lifetime limit of forty thousand dollars. Any money inside the FHSA grows tax free, including interest, dividends, and capital gains. When you use the account to buy or build your first home, your withdrawal is completely tax free and you do not have to repay it.
To qualify, you must be a Canadian resident between eighteen and seventy two, and you and your spouse must not have owned a home in the current year or the previous four years. When you withdraw funds, you must have a written agreement to buy or build a qualifying home that will become your principal residence before October first of the following year.
If you do not end up buying a home, you can transfer your FHSA savings into your RRSP or RRIF on a tax free basis. Withdrawals that are not used for a home purchase are treated as taxable income. The account must be closed within the year you buy your home, or after fifteen years, or when you turn seventy one.
Your FHSA can hold the same types of investments you would find in an RRSP or TFSA, including stocks, bonds, ETFs, mutual funds, GICs, and cash. Contributions are tax deductible in the year you make them, or you can carry them forward to future years.
The FHSA is a powerful tool for first time buyers. If you are unsure whether it fits your plan, think about your long term goals and how much you need to save. Some people use the FHSA on its own, while others combine it with the RRSP Home Buyers Plan or a TFSA. A financial advisor can help you choose the right mix for your situation.
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