What even are these accounts: FHSAs

You have probably heard of an FHSA (or maybe some other registered accounts) before and probably got even more confused when you tried to understand what it all meant. Well, I'm here to hopefully help simplify it for you.

FHSA...What is it? Why should I use it?

This stands for First Home Savings Account; this account was introduced to try and help Canadians buy their first home and it combines some of the best features from the RRSP and TFSA. I would highly suggest reading my posts on RRSPs and TFSAs first because you will be better able to understand the features of this account. If you haven't read my blog post on RRSPs please click here or click here to read my blog post on TFSAs

As I said above this account combines the best features from RRSPs and TFSAs! So, when you put money into this type of account you receive an income tax deduction (like with an RRSP). What this means is that if you've earned $50,000 in one year and you contribute $5,000 to your FHSA you will only be taxed as if you earned $45,000. Additionally, when you take the money out of your FHSA (as long as it is for the purchase of your first home) you pay no income taxes on the growth of your money (like with a TFSA). For example, let's say you've put $40,000 into your FHSA then grow that amount to $80,000 by the time you purchase your first home. When you take the $80,000 out to put towards the downpayment of your first home you pay no income taxes on the growth of your initial contribution. Typically if you've grown your investments by $40,000 you would have to pay something called Capital Gains Tax on the increase in your investments (click here to read more about Capital Gains Tax from Wealthsimple). You may be thinking something along the lines of "Wait I don't pay income taxes on the money I put in or on the money I take out?" and you'd be right! When I first heard about this account (it was introduced in Spring of 2023) I thought it was too good to be true so I started reading all the information I could find about the FHSA and it really is as good as it sounds. However, there are a lot of rules with this account so let me explain what they are.

In order to open this account you must be considered a First time home buyer by the Government of Canada but their definition of who is a first time home buyer is interesting to me and some people that don't think they qualify may be eligible to open an FHSA! So, who can open this account? Here are the qualifiers:

• You must be 18 years of age or older. But you must be under 72 as of December 31st in the year you open your account.

• You must be a resident of Canada (click here to determine if you're a resident or here if you become a non-resident after opening your FHSA)

• You did not live in a qualifying home (in Canada or elsewhere) as your principal place of residence that you owned or jointly owned in this calendar year or in the previous 4 calendar years AND (if you have a spouse or common law partner) you did not live in a qualifying home (in Canada or elsewhere) as your principal place of residence that your spouse or common-law partner owned or jointly owned in this calendar year or in the previous 4 calendar years

The reason I stated above that you may qualify as a first time home buyer even if you didn't think you would is because if you only own a rental property (or multiple) but don't live in a property you (or your spouse/common law partner) own you would be eligible to open an FHSA. Alternatively, let's say you sell your home in 2025 and rent elsewhere for a few years you would be eligible to open an FHSA in 2030. If you are curious to see if you would qualify to open an FHSA please click here to read the rules directly from the Governments website.

Just like other registered accounts the FHSA has rules about contributions into the account, taking money out of the account, and when you need to take money out.

Contributions to an FHSA

You can contribute $8,000 per calendar year to your FHSA starting the year you open your account. You can only carryforward one years worth of contributions. The maximum lifetime contributions are $40,000. You can also see your contribution limit on your latest Notice of Assessment (NOA). Click here to see the rules for making contributions into your FHSA.

Closing an FHSA

You must close your FHSA by December 31st of the year in which one of the following events occur:

• the 15th anniversary of opening your first FHSA (regardless of if you made any contributions in that calendar year)

• you turn 71

• you made your first qualifying withdrawal in the prior year

So if you open your FHSA in 2025 you must close it on or before December 31st, 2040. However, if you turn 71 in 2037 you must close the FHSA on or before December 31st, 2037. Lastly, if you made your first qualifying withdrawal in 2028 (before turning 71) you would have to close the account on or before December 31st, 2029. Click here to read more about closing your FHSA.

Withdrawals from an FHSA

When you close your FHSA the money needs to go somewhere and your options are as follows:

• Use the funds to purchase a qualifying first home (no immediate tax consequences)

• Transfer the money DIRECTLY to your RRSP or RRIF (this will not use your unused RRSP contribution limit and there are no immediate tax consequences)

• Withdraw the money and claim it as income (involve immediate tax consequences)

The information presented above is accurate as of February 2026; for updated rules please click here (CRA's website).