What is a First Home Savings Account (FHSA)?

Introduced in 2023, the First Home Savings Account (FHSA) is a tax-advantaged savings vehicle created to help Canadians step onto the property ladder for the very first time.

Crowe MacKay LLP’s trusted advisors help you understand how the First Home Savings Account (FHSA) works, from eligibility and contributions to beneficiary rules and closing your account. Connect with our team to explore how this strategy fits your goals.

How to Open an FHSA

To open a First Home Savings Account (FHSA) in Canada, you’ll need to meet the following eligibility requirements:

• Age Requirement: You must be at least 18 years old (or the age of majority in your province).
• Residency: You must be a resident of Canada for tax purposes.
• First-Time Homebuyer Status: You qualify as a first-time homebuyer if, at the time you open the account, you haven’t lived in a home that you or your spouse/common-law partner owned during the current calendar year or in the previous four calendar years.

Once these requirements are met, opening a FHSA is straightforward - simply contact your financial institution or trusted investment advisor. 

FHSA Contribution Rules

• Annual Contribution Limit: $8,000 per calendar year
• Lifetime Limit: $40,000
• Carry Forward Room: If you do not reach your yearly limit, unused contribution room rolls forward. However, the maximum you can carry forward into the next year is capped at $8,000
• Registered Retirement Savings Plan (RRSP): You may also transfer funds from an RRSP to your FHSA (up to the contribution limit). 

FHSA contribution rules can feel a bit tricky, so it’s important to keep an eye on your available room each year. You can confirm your limit directly from your personal tax return, or—more accurately—by reviewing your Notice of Assessment from the Canada Revenue Agency (CRA). Every time you contribute to your FHSA, you’ll also receive a tax slip, which must be reported on your personal tax return.

Tax Tip: You won’t begin accumulating contribution room until you open the account - another reason to get started early, however please note the 15 year rule below.

Designating Beneficiaries/ Successor Holders

Similar to RRSPs, an FHSA allows you to designate beneficiaries. You can name a spouse, common-law partner, or another individual as the beneficiary of your account. 

Why is this important? Because when you pass away, the FHSA won’t automatically be dissolved into your estate. Instead, your spouse can take over the account without immediate tax consequences, provided they’re eligible. If not, the funds could be transferred into their RRSP or Registered Retirement Income Fund (RRIF), giving your family flexibility.

Alternatively, you can designate your spouse as a successor holder which allows the FHSA to continues under their name as if it was theirs all along. There is no transfer, no extra paperwork, and no taxable event triggered at the time of death. This is particularly useful for couples saving together for their first home. It ensures that even if something tragic happens, your shared goal of homeownership remains intact.

Benefits of FHSA

The FHSA isn’t just another savings account—it’s a powerful financial tool with several clear advantages:

1. Tax Deductions: Contributions to FHSA reduce taxable income. If you earn $60,000 annually and contribute $8,000, you’re only taxed as if you made $52,000.
2. Tax-Free Withdrawals: When the funds are used for a first home, there’s zero tax on withdrawals
3. Dual Strategy: You can use the FHSA alongside the Home Buyers’ Plan (HBP), which lets you borrow up to $35,000 from your RRSP. Together, that’s potentially $75,000+ toward your down payment.
4. Flexible Investments: FHSA funds don’t just sit idle. You can invest them in stocks, bonds, ETFs, GICs, or mutual funds to grow your savings faster.
5. No Repayment Requirement: Unlike the HBP, you don’t need to pay the money back after withdrawing it for your home.

Tax Tip: If you're in a lower tax bracket today, consider delaying your deduction to a future year when your income is higher - this strategy can maximize your tax savings.

Closing the FHSA

An FHSA isn’t meant to last forever. In fact, it has a clear expiry date. The account must be closed on the earliest of:

• 15 years after opening the FHSA
• The end of the year you turn 71
• The year following your first qualifying withdrawal

If you don’t end up buying a home, all is not lost. The balance can be transferred, tax-free, into your RRSP or RRIF without affecting your RRSP contribution room. That way, your money still works for your future, just in a different capacity.

Frequently Asked Questions

1. Can I open more than one FHSA?
   Yes, you can have multiple accounts, but your total contributions across all of them cannot exceed the $8,000 annual or $40,000 lifetime limit.
   
   
2. What happens if I over-contribute to a FHSA?
   Over-contributions are subject to a 1% penalty per month on the excess amount until it’s withdrawn or new room becomes available.
   
   
3. Can I withdraw FHSA funds for a second home or investment property?
   No, withdrawals must be for your first qualifying home. Using the money for anything else makes it taxable.
   
   
4. Can my spouse and I both open FHSAs?
   Absolutely. Each spouse can open their own account, doubling your household savings potential to $80,000 lifetime.
   
   
5. What if I never buy a home?
   You can transfer the balance into an RRSP or RRIF without any tax hit. You won’t lose the tax advantage—it just shifts gears toward retirement savings.
   
   
6. How long does it take to withdraw money from a FHSA for a home purchase?
   Typically, it can take a few business days. Plan ahead so you’re not scrambling at closing time.
   
   

The First Home Savings Account is one of the most impactful financial tools available for Canadians chasing the dream of homeownership. With its tax-deductible contributions, tax-free withdrawals, and flexible investment opportunities, the FHSA provides savings power and financial security. Whether you’re just starting your homeownership journey or strategically planning with your spouse, leveraging an FHSA can shave years off the time it takes to save for a down payment. And even if life takes you in a different direction, the account’s flexibility ensures your hard-earned money never goes to waste. Take advantage of the FHSA now and make your dream of owning a home more financially achievable.