A first home savings account (FHSA) is a registered plan allowing a prospective first-time home buyer to save for your first home tax-free (up to certain limits). You can open an FHSA with your bank starting April 1, 2023. Contributions that you make to your first home savings accounts (FHSAs) are generally deductible on your income tax and benefit return. How it works:
- Annual contributions of up to $8,000 can be made, and are tax-deductible.
- Unlike RRSPs, only contributions made within the calendar year (not within the first 60 days of the following calendar year), or contributed and not deducted in a previous tax year, can be claimed as a deduction for that calendar/tax year. Similar to RRSPs, contributions made can be carried forward indefinitely and deducted in a later tax year instead of being deducted in the year the contribution is made.
- You can open an FHSA with bank, credit union, or a trust or insurance company. Your issuer will advise you on the types of FHSAs and the qualified investments they can contain
- Unused contribution room can be carried forward, but only to a maximum of $8,000.
- The lifetime contribution limit is $40,000.
You can withdraw all of the property from your FHSAs tax-free if you meet all the following criteria:
- you must fill out Form RC725, Request to Make a Qualifying Withdrawal from your FHSA and give it to your FHSA issuer .
- you must be a first-time home buyer
- you must have a written agreement to buy or build a qualifying home with the acquisition or construction completion date of the qualifying home before October 1 of the year following the date of the withdrawal
- you must not have acquired the qualifying home more than 30 days before making the withdrawal
- you must be a resident of Canada from the time that you make your first qualifying withdrawal from one of your FHSAs until the earlier of the acquisition of the qualifying home, or the date of your death
- you must occupy or intend to occupy the qualifying home as your principal place of residence within one year after buying or building it