What is a Tax-Free First Home Savings Account (FHSA) (aka First Time Home Buyer Savings Account)

The Canadian Government has proposed the introduction of the Tax-Free First Home Savings Account (FHSA) in the 2022 budget. This new registered plan would give prospective first-time home buyers the ability to save towards their first home by allowing account holders to contribute up to $40,000 over the lifetime of the plan on a tax-free basis.

An FHSA combines the features of a Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). Similar to a Registered Retirement Savings Plan (RRSP), contributions would be tax-deductible, and withdrawals to purchase a first home, including from investment income, would be non-taxable, like a Tax-Free Savings Account (TFSA).

In the 2023 tax year, Canadians will be allowed to contribute the full $8,000 annual limit during the year.