New in 2023, the First Home Savings Account is a way to save for the purchase of a qualifying first home. Plan holders benefit from their contributions being tax deductible, tax free growth of contributed funds and withdrawals received tax-free.
Who is Eligible?
To open a FHSA, you must be at least 18 years of age, not more than 71 years of age on December 31st of the year the plan is opened, a resident of Canada and a first-time home buyer. In certain provinces and territories, the legal age an individual can open a FHSA is 19 years old.
How Much can you Contribute?
Your FHSA participation room in the year that you open your first FHSA is $8,000 and contributions are subject to a lifetime $40,000 limit. You can carry forward your unused FHSA participating room at the end of every year, up to a maximum of $8,000 to use in the following year. Any amount over and above your participation room is subject to a penalty tax of 1% per month on the highest excess FHSA amount in that month.
Making a Qualifying Withdrawal from your FHSA
If you are making a qualifying withdrawal, you can withdraw all of the property from your FHSA tax-free. A qualifying withdrawal is a withdrawal from your FHSA where all of the following conditions are met:
- You must fill out form RC725 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 1st 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 residence within one year after buying or building it.
Maximum Participation Period
The maximum length of time that you can participate in the FHSA begins when you open the FHSA and end on December 31st of the year in which the earliest of the following occurs:
- The 15th anniversary of opening your FHSA
- You turn 71 years of age
- The year following your first qualifying withdrawal from your FHSA.