FHSA

Canada has now introduced a new savings account, the First Home Savings Account (FHSA). The FHSA is a registered plan, allowing you, as a prospective first-time home buyer, to save for your first home tax-free (up to certain limits). You can open an FHSA starting April 1, 2023.

FHSA features include:

• A contribution maximum of $40,000, with a limit of $8,000 annually (note that, irrespective of when an account is opened in 2023, the full annual limit will apply).
• Contribution room accumulates only after the account is opened, and any unused amounts up to a maximum of $8,000 can be carried forward for use in the following year.
• Qualified contributions are tax-deductible and qualifying withdrawals – which includes capital growth and all investment income accumulated within the account – are non-taxable.
• Investments that can be held are identical to those currently permitted in TFSAs.
• Unlike the existing Home Buyers’ Plan option currently in place today through RRSPs, qualified FHSA withdrawals don’t need to be paid back.
• An account can only be held for a maximum of 15 years or until the account holder turns 71.
• Unused FHSA savings can be transferred, on a tax-free basis, to an RRSP/RRIF or withdrawn as taxable income.