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  • Writer's picturePerron Team

What we know about the Tax-Free First Home Savings Account




Canadians will soon get a boost when it comes to saving for their first home. Starting in April of 2023, the Tax-Free First Home Savings Account (FHSA) will be available to those over the age of 18 who have dreams of owning a home. This account is part of a campaign promise by the Liberal Party in the last election. There are many details associated with this interesting vehicle – here is a high-level summary.


Save up to $40,000 tax-free

The FHSA will allow Canadians to save up to $40,000 tax-free towards a first home. Eligible taxpayers can contribute up to $8,000 a year to the account and this amount can be carried forward into future years if not used. The FHSA will permit a range of investments, including stocks, bonds and other securities.


To open an account, you must be:

1) A Canadian resident, 2) Over the age of 18, 3) Not a homeowner in the current year or the previous four years.


The FHSA combines some of the best features of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). The contributions are tax deductible, and the money grows inside the account tax-free. The money can then be withdrawn from the account without tax penalty, although it must be spent within 15 years of opening the account or before the age of 71, whichever is earliest.


The FHSA is unique because the proceeds must be used to purchase a home. However, any funds that are not used to purchase a home can be transferred to an RRSP or RRIF account on a rollover basis, and the RRSP rules will apply going forward. It is important to note that such transfers will not impact your RRSP contribution limits.


Speak to your portfolio manager

The FHSA looks like an interesting option for children or grandchildren who plan to purchase a home. Although the Federal Government aims to make FHSAs available after March 2023, the enabling legislation has not been enacted. In the meanwhile, now is a good time to sit down with your Cumberland Portfolio Manager to discuss how this new investment vehicle might fit into your family’s financial plans and to understand all of its many workings.



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