Here's Everything We Know About Canada's Tax-Free First Home Savings Account In 2023
The account is designed to make it easier for first-time buyers to save. 🏠🔑
Last year, as part of the 2022 budget, the federal government laid out its plans to introduce a new Tax-Free First Home Savings Account (FHSA) in Canada.
Per the original plans, the account would give prospective first-time home buyers the ability to save up to $40,000 in total, with tax-deductible contributions and non-taxable withdrawals.
The purpose of the account would be to help prospective homebuyers in Canada save more money towards their first home, and allow more people to get onto the property ladder faster.
At the time, the feds said Canadians will be able to open a FHSA "at some point" in 2023, with individuals able to contribute the full $8,000 annual limit that year — regardless of when accounts were opened.
With final details expected to be announced in April, here's everything we know about Canada's new Tax-Free First Home Savings Account so far and what you should know about applying to open one.
What is the Tax-Free First Home Savings Account?
In the 2022 budget, the federal government proposed the introduction of a Tax-Free First Home Savings Account (FHSA) — a new registered plan that would help Canadians save towards their first home.
The account would allow account holders to contribute up to $8,000 per year (up to a lifetime total of $40,000) and, like a Registered Retirement Savings Plan (RRSP), contributions would be tax-deductible.
Any unused contribution room would be able to be carried forward to the following year, up to a maximum of $8,000.
What's more, like a Tax-Free Savings Account (TFSA), eligible withdrawals to purchase a home would be non-taxable.
Who can open a FHSA?
Per the original plans, individuals would have to be at least 18 years old and a resident of Canada to open an FHSA.
What's more, they must be a first-time homebuyer — meaning they have not owned a home and lived in it during any part of the calendar year before the account is opened, or any time in the previous four years, either.
The account could remain open for 15 years, but would cease to exist after December 31 of the fifteenth year.
What's more, those who turn 71 years old while contributing to a FHSA must close the account before the end of the calendar year that they turned 71 — or buy their first home.
What happens if you don't buy a home?
If — for whatever reason — you do not end up buying a home or you do not qualify to withdraw the money for your first home, all would not be lost.
Any unused savings in your FHSA would be able to be transferred to another FHSA, or a qualifying RRSP or RRIF (Registered Retirement Income Fund) on a non-taxable transfer basis.
Those transferred funds would be taxed upon final withdrawal, but not upon transfer.
If you decide to withdraw your FHSA savings without purchasing a home, all funds would be subject to taxes.
How to withdraw the money for your first home
To withdraw your FHSA savings tax-free, there are set to be several conditions.
The individual must be a first-time homebuyer and meet the qualifying conditions, have a formal agreement to buy or build an eligible home in Canada before October 1 of the year following the year of withdrawal, and they must intend to live in the property within one year of buying or building it.
When can you open a FHSA?
Exactly when Canadians are able to open an FHSA remains unclear, with final details on the plan expected to be announced in April.
What we do know is that the feds expect Canadians to be able to open and contribute to an FHSA "at some point in 2023."
It has been said that, no matter when this happens, account holders will be able to contribute the full $8,000 limit in that calendar year.
Banks, including Scotiabank, RBC and TD Bank have already started sharing information about FHSA's on their websites, with many set to offer the accounts as soon as the government gives the go-ahead.
Where can you open an FHSA?
Any financial institution able to issue RRSPs and TFSAs are expected to be able to issue FHSAs, including banks, credit unions, Canadian trust companies and life insurance companies.
How is the FHSA different from the Home Buyers Plan?
Canada's existing Home Buyers' Plan allows eligible Canadians to withdraw up to $35,000 from an RRSP, then pay back the funds over 15 years.
The FHSA is different as the funds do not need to be paid back.
With more information set to be shared in the coming weeks, now is a good time to consider whether a FHSA is an option to help you on your home buying journey!
A boy runs balancing a table on his head during heavy rains in Havana, Wednesday, Sept. 23, 2026. (AP Photo/Ramon Espinosa)