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What is a First Home Savings Account and How Does it Work?

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We all know that buying a first home is difficult—and it’s not getting easier. According to the Canadian Real Estate Association (CREA), the average price for a home in Canada was $659,395 in January 2024. That’s an increase of 7.6 per cent in just the last 12 months. And average prices in Toronto and Vancouver? They’re both north of $1 million.


With real estate costs like these, you may wonder how you’ll ever scrape together a decent down payment and become a first-time homebuyer in Canada. If you’re lucky, you might get some help from family. But most of us have to do it the hard way: save, save and save some more. That’s where the First Home Savings Account (FHSA) comes in.

Introduced by the federal government in 2023, an FHSA is a registered savings plan designed to help first-time homebuyers save up to $40,000 for a down payment on their first home, tax-free. It shares some similarities with Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs).

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Related: The Average Cost to Rent a One-Bedroom Apartment in Canada

Who Is It For?

As its name suggests, a First Home Savings Account (Canada) is designed for those buying their first home. Several conditions must be met to open an account. These include:

• Being of legal age or older (18 or 19, depending on your province or territory)
• Being 71 years of age or younger by December 31 of the year you open the account
• Being a Canadian resident
• Not living in the qualifying home in the same calendar year (or four previous years)

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What Are the Benefits?

FHSAs are a tax-free way to save for your first home. Contributions are tax-deductible, and you may contribute (or transfer from an RRSP) up to $8,000 per year, up to a lifetime maximum of $40,000 for all FHSAs. Unused contribution room from any year can be carried forward, and any income gained inside the FHSA doesn’t affect the contribution limits.

Related: How to Save for a Down Payment in These Canadian Provinces


Who Offers FHSAs and How Do I Get One?

FHSAs are widely available from banks, credit unions, trusts and insurance companies. To be considered a qualified investment, the issuer’s offering must meet government criteria, similar to investments qualifying as RRSPs.

There are three kinds of FHSAs:

• Depository FHSA: Your investment is held in an account with your provider
• Trusteed FHSA: A trust holds your investment
• Insured FHSA: An annuity contract with a licensed provider

If you prefer, you can self-direct your FHSA.

To open a FHSA, choose a provider and an FHSA that suits your needs. The provider will need information to register the FHSA, including your SIN, date of birth and documentation showing you’re a qualified individual.

Related: Buying an Older Home? Watch Out for These Red Flags

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How Do You Withdraw Your Savings?

Qualifying withdrawals are not considered income if they are used to buy a qualifying home and meet withdrawal criteria. The same applies to designated withdrawals of excess contributions. If the withdrawal is considered a taxable withdrawal, it must be counted as income.

A qualifying withdrawal must meet these conditions:

• You must be a first-time homebuyer
• You must have a written contract to buy or build the qualifying home
• You must not have bought the home more than 30 days before withdrawal
• You must be a resident of Canada
• You must occupy the home as your primary residence within one year of purchase or construction
• You must fill out the proper paperwork for your FHSA issuer

You may also transfer FHSA funds to an RRSP, RRIF or another FHSA. Taxable withdrawals may be made, but these must be reported as income and the amount withdrawn is subject to tax withholding.

Related: The Cheapest Places to Live in the World in 2024


While a FHSA may sound complicated, it’s quite similar to an RRSP. FHSAs are an easy way to save a significant down payment for a new home, free from a tax burden— and your money grows inside the FHSA. Your financial provider can help you with the details. And before you know it, you’ll be on your way to owning your first home.

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