Tax-Free First Home Savings Account

Niels Jensen
| 2/9/2023

Designed to assist Canadians looking to save for the purchase of their first home.


The Tax-Free First Home Savings Account (FHSA) is a new Federal program designed to assist Canadians in saving to purchase a home for the first time. Crowe MacKay’s trusted advisors review what a FHSA is, who is eligible, how to open a new account, and how to contribute to and make withdrawals from a FHSA.

What is a First Home Savings Account (FHSA)?

A FHSA is a new savings plan for Canadians that’s effective April 1, 2023. It allows prospective home buyers to save up to $40,000 on a tax-free basis. Like a Registered Retirement Savings Plan (RRSP), contributions would be tax-deductible, and withdrawals to purchase a first home would be non-taxable, like a Tax-Free Savings Account (TFSA).

Qualified individuals can contribute up to an annual maximum of $8,000 to a FHSA with the lifetime maximum contribution being $40,000. The annual contribution limit counts for contributions made during the calendar year. Unlike a RRSP, contributions made within the first 60 days of a given calendar year cannot be attributed to the previous tax year.

How to Open a FHSA
How Contributions Work
How Withdrawals Work
Eligible Investment Options
How to Close a FHSA
How to Open a FHSA

To open a FHSA, an individual must be:

  • a resident of Canada;
  • at least 18 years of age; and
  • a first-time home buyer, meaning they have not owned a home in which they lived at any time during the part of the calendar year before the account is opened or at any time in the preceding four calendar years. For this purpose, ownership is defined broadly and includes beneficial ownership, but excludes a right to acquire less than 10% of a qualifying home.

An individual can open a FHSA through eligible issuers which include:

  • Canadian trust companies,
  • life insurance companies,
  • banks, and
  • credit unions.
How Contributions Work

The annual contribution will be reported on an individual’s personal tax return in the same tax year as the contribution was made. The individual is then eligible for a tax deduction in a similar way as a RRSP deduction. An individual is allowed to determine the tax year they wish to deduct the contribution , also similar to a RRSP. This allows an individual to carry-forward unused FHSA annual contributions to future tax years.

Any unused annual contribution room will accumulate for individuals to future years. For example, if an individual contributed $4,000 to a FHSA in 2023, the individual would have a maximum contribution of $12,000 in 2024 (the remaining $4,000 unused in 2023 plus the annual $8,000 maximum). Each individual is responsible for ensuring they do not exceed their annual maximum contribution limits.

How Withdrawals Work

In order for a withdrawal from a FHSA to be non-taxable, it has to meet certain conditions.

1. A taxpayer must be a first-time home buyer at the time a withdrawal is made.

2. The individual must also have a written agreement to buy or build a qualifying home before October 1 of the year following the year of withdrawal and intend to occupy the qualifying home* as their principal place of residence within one year after buying or building it.

If any of the above conditions are not met, the withdrawal will be considered non-qualifying and will be included in the individual’s personal income in the same tax year as the withdrawal was made. Non-qualifying FHSA withdrawals will be taxed with the same treatment as taxable RRSP withdrawals.

Eligible Investment Options

An FHSA is permitted to hold the same qualified investments that are currently allowed to be held in a TFSA. In particular, individuals can invest in:

  • mutual funds,
  • publicly traded securities,
  • exchange-traded funds (ETFs),
  • government and corporate bonds, and
  • guaranteed investment certificates (GICs).

Examples of prohibited investments inside a FHSA include:

  • land and real estate,
  • shares of private corporations, and
  • general partnership units.
How to Close a FHSA

An FHSA of an individual would cease to be an FHSA, and the individual would not be permitted to open an FHSA, after December 31 of the year in which the earliest of these events occurs:

1. The fifteenth anniversary of the individual first opening an FHSA


2.The individual turns 71 years old

Any savings not used to purchase a qualifying home can be transferred on a tax-free basis into an RRSP or Registered Retirement Income Fund (RRIF), otherwise the funds would have to be withdrawn on a taxable basis. Individuals who make a qualifying withdrawal could transfer any unwithdrawn savings on a tax-free basis to an RRSP or RRIF until December 31 of the year following the year of their first qualifying withdrawal.

Does the FHSA Affect the Home Buyers Plan

The Home Buyers Plan (HBP) will continue to be available under existing rules. However, an individual would not be permitted to make both a FHSA withdrawal and a HBP withdrawal in respect of the same qualifying home purchase.

Is the First-Time Home Savings Account a smart financial decision for you? Contact your trusted Crowe Advisor to review your financial plan and how to maximize your saving potential.


*A qualifying home is classified as a housing unit located in Canada. A share in a co-operative housing corporation that entitles the taxpayer to possess, and have an equity interest in a housing unit located in Canada, would also qualify. However, a share that only provides a right to tenancy in the housing unit would not qualify.


This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. This publication is not a substitute for obtaining personalized advice.

If you are looking for Tax Services, Crowe MacKay provides personalized support. Our tax professionals will help you maximize tax-planning opportunities and ensure the minimum amount required by law is paid.

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Niels practice focuses on clients ranging from small, owner-managed businesses to large privately-held businesses. His client service focus spans across many areas including audit, accounting, taxation issues, and numerous special consulting engagements. Niels industry expertise clients include agricultural producers, municipalities, manufacturing, automotive dealerships, and non-profit organizations.
Niels Jensen
Niels Jensen

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