FHSA Is Canada’s Best First Home Buyer’s Saving Account
The Tax-free first home savings account is specifically designed to help Canadians save up to $40,000 tax free, for your first home purchase. You should download my free google sheets budget template if you need help managing your cash flow to save money!
This is my ultimate guide to the FHSA savings account. I’ll show you the pros and cons, then how to get started creating your own account. PLUS if you’re still struggling and want to chat with me I’ll even walk you through the setup process via zoom.
Download The Eligibility Flowchart
Easily determine if you qualify for the first home savings account
Free to download and share with your friends and family!
Who can apply for the FHSA
Tax Free Home Savings Account Eligibility
You need to watch my full Tax Free First Home Savings Account Guide on YouTube, you should! The FHSA account combines the best of both the TFSA and RRSP. Making a savings opportunity that Canadians should take advantage of.
Canadian, 18+ years old
First time home buyer, OR have not lived in a home that you own for the previous 4 calendar years.
Non-residents are allowed to use the FHSA but will be taxed on withdrawals if you are not a permanent resident when you withdraw.
You can open a FHSA at any online brokerage or fintech app
What you need to know about the tax free home savings account
FHSA Details
The department of finance in Canada released the First Home Savings Account at the beginning of 2023. This was a federal government initiative to help young Canadians invest their savings tax-free in order to reduce the record in-affordability gap happening in the Canadian real estate market.
After 15 years or 71 years old if you have not used your FHSA savings to buy a home, it has to be transferred, tax free into an RRSP or RRIF. Or withdrawn on a taxable basis (like an RRSP).
Invest your FHSA savings! You can use your money in your FHSA account to invest into low-cost index funds just like a TFSA / RRSP.
Annual contribution limit of $8,000 and a max lifetime contribution limit of $40,000.
Can withdraw up to 30 days AFTER you move into your first home purchase.
Home must be in Canada, shares in co-operative housing (condos) are allowed.
Can do non-qualified withdrawals, but will be taxed on the income.
Tax Free First Home Savings Account FAQ’s
What is an FHSA?
FHSA stands for Tax Free First Home Savings Account. It is available to Canadians, and non-residents that are 18 and older. It allows you to reduce your taxable income when you contribute to this account. Plus it also allows you to withdraw your investments tax free when you’re ready to purchase your first home. It was specifically designed to help Canadians invest and save money for a home purchase.
Can you invest your savings within the FHSA account?
Yes! You’re allowed to invest in the entire stock market. Just like an RRSP or TFSA account. Which is amazing as you can invest in low cost index funds to grow your savings beyond the $40,000 max contribution room. So you could potentially have hundreds of thousands of dollars for your first home purchase.
How do you open an FHSA?
You can open a FHSA at any online brokerage, bank, or fintech company. Personally I used Questrade to create my first FHSA account. It was very simple and took less than 5 days to verify my identity and setup automatic deposits to fund my account.
How To Open Your First FHSA Account
#1 Start Your Account
To an online brokerage like Questrade
#2 Verify Identity
Upload your Canadian I.D. so the financial institution can report your contributions.
#3 Fund Your Account
Setup recurring transfers to automatically save.
#4 Start Investing
Try buying low cost index funds like VFV to potentially grow your savings even more.
Here’s some strategies to maximize your savings
FHSA Investing Strategies
Considering the FHSA is brand new, it’s not exactly clear on what the best strategies are yet. However here are some ideas to ponder with your wealth coach or financial advisor.
Put all of your savings here FIRST. When you’ve maxed out your FHSA contribution limit, then start directing your savings into a TFSA or RSP.
Use the FHSA even if you never buy a home. As you can always convert it tax-free to your RSP without affecting your RSP contribution room.
Invest your money in your FHSA! One of the biggest mistakes Canadians make with the First Home Savings Account, TFSA, and RSP is not investing the money you contribute. Low cost index funds is a great place to start and finish your investing with.
Handy dandy comparison table
FHSA vs RRSP vs TFSA
Canada’s 3 main personal savings accounts that have tax and investing advantages are the TFSA, RSP, and FHSA. If you are like me then you get these acronyms mixed up.
So I’ve created this handy dandy little comparison table so your can easily view the pros and cons of the first time home savings account to the TFSA and RSP.
| FHSA | TFSA | RSP | |
|---|---|---|---|
| Tax credit on contributions | ✅ | ❌ | ✅ |
| Allowed to invest your savings | ✅ | ✅ | ✅ |
| Tax-free when selling investments | ✅ | ✅ | ✅ |
| Tax-free when withdrawing money out of the account | ✅ | ✅ | ❌ |
| Have to pay back withdrawals when used for first time home purchases | ❌ | ❌ | ✅ |
| Recommended Savings Order | #1 | #2 | #3 |
