First Home Savings Account (FHSA): How to Save for your First Home, Tax-Free

Getting ready to purchase your first home is an exciting milestone. However, it can often be daunting to save the required down payment. A recent study conducted by Statistics Canada reveals that concerns about housing affordability are causing prospective homeowners, particularly those under the age of 35, to hesitate to enter the real estate market [1]. In an effort to empower aspiring homeowners, the Canadian government introduced a new savings plan – the First Home Savings Account (FHSA). This savings plan is your tax-free ticket to homeownership, bringing you one step closer to the dream of owning your first home.

What is an FHSA?

The First Home Savings Account was introduced in 2022 by the federal government to give potential first-time home buyers the ability to save up to a maximum of $40,000 ($8,000 per year) for their first home, tax-free. Contributions that you make to your FHSA are deductible on your income tax and benefit return. [2] A tax deduction is a qualifiable expense that can lower your taxable income and the amount of tax you must pay.

Who can open an FHSA?

You qualify to open an FHSA if:

  • You did not own a home, independently or jointly, within the current calendar year before the FHSA was opened or at any time in the four calendar years before that
  • You are 18 years of age or older
  • You are a Canadian resident 

How does an FHSA work?

Getting started with an FHSA is a straightforward process. Simply visit your preferred financial institution, whether it’s a bank, credit union, trust, or insurance company. Your chosen FHSA issuer will guide you through the account options available and the qualified investments you can include.

You have the flexibility to maintain more than one FHSA. However, to prevent unintentional tax complications, the total annual contributions to all your FHSAs should not exceed $8,000 per year, with a lifetime limit of $40,000. If you don’t fully utilize your contribution room in a given year, the unused portion can be carried forward to the following year, up to a maximum of $8,000.

Your FHSA contributions can be strategically invested in guaranteed investment certificates (GICs), exchange-traded funds (ETFs), and stocks, among others. These investments also have the advantage of accruing tax-free interest.

It’s important to note that the funds within your FHSA must be used within 15 years from the account’s creation or before reaching the age of 71. In the event that you haven’t utilized the funds by either of these events, transferring them into a registered retirement savings plan (RRSP) or a registered retirement income fund (RRIF) is a simple and tax-efficient option.

How to Make a Tax-Free FHSA Withdrawal

To ensure your First Home Savings Account (FHSA) withdrawal is tax-free and not considered part of your income, specific criteria must be met. You can withdraw your funds in the following ways to remain tax-free:

  • Qualified Withdrawal: Your withdrawal qualifies for tax-free status if:
    • You are a first-time homebuyer.
    • You have a written agreement to purchase or build a qualifying home, with the completion date before October 1 of the year following the withdrawal.
    • You maintain Canadian residency from your first qualifying FHSA withdrawal until you either acquire the qualifying home or until your passing.
    • You plan to occupy the qualifying home as your primary residence within one year of its purchase or construction.
  • Designated Withdrawal: Tax-free status also applies to withdraws made from your FHSA of any amount that exceeds your available FHSA contribution room. 
  • Designated Transfer: If you directly transfer funds from your FHSA to another FHSA, a registered retirement savings plan (RRSP), or a registered retirement income fund (RRIF), it’s considered a designated transfer and remains tax-free.

If your withdrawal doesn’t meet these requirements, the amount withdrawn from your FHSA is a taxable withdrawal and must be included as income on your income tax and benefit return for the year the withdrawal is received.

Additional Resources for Home Buyers

In addition to the FHSA, there are other valuable resources to aid you in your homebuying journey:

  • Home Buyers Plan (HBP): The Home Buyers’ Plan (HBP) is a government program that offers the flexibility to withdraw funds from your Registered Retirement Savings Plans (RRSPs) to acquire or construct a qualifying home. An attractive feature of the HBP is the option to repay the withdrawn funds over a 15-year period. [3]
  • Co-Ownership: In today’s dynamic real estate market, the challenge of saving for a down payment may not be the only obstacle. This is where co-ownership options come into play, providing innovative ways to team up with others to collectively qualify for a mortgage. Co-Own My Home has an easy 6-step co-ownership process, our team of experts will guide you through each step, manage the “get to know you” process between co-buyers, and provide continued support.


To sum it up, First Home Savings Accounts are a practical and tax-savvy resource designed to guide aspiring homeowners toward their real estate dreams. Giving potential first-time home buyers the ability to save up to $40,000 tax-free while accruing tax-free interest. FHSAs can be a valuable tool for first-time buyers.



 [1] (n.d.). Distributions of household economic accounts for income, consumption, saving and wealth of Canadian households, second quarter 2023. Https:// 

[2] (n.d.). Tax deductions for FHSA contributions. 

[3] (n.d.). What is the Home Buyers’ Plan (HBP)?