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Banking Canada - Last Updated:
First Home Savings Account Canada
Buying your first home is a huge financial milestone that often requires significant savings. The First Home Savings Account (FHSA) is a new financial product that has changed the game by giving new home buyers more benefits and incentives to save up for that dream home.
In this article we’ll be diving into the new First Home Savings Account in Canada, what it is, how it works, tax benefits, contributions, and more.
Table of Contents
What is the First Home Savings Account in Canada?
A First Home Savings Account (FHSA) is a special account designed specifically for first time home buyers looking to save up for a house.
This is a regulated government account with a contribution limit of $8,000 per year, up to a maximum of $40,000 total contribution.
The FHSA is a cross between a TFSA, RRSP, and other registered accounts. It is similar to an RRSP in the sense that contributions are tax deductible and will reduce your taxable income.
Like a Tax Free Savings Account (TFSA), you may withdraw your money to purchase a house without paying taxes.
In addition, you can make eligible withdrawals (in this case, putting it towards a down payment) without paying taxes.
Unlike a regular savings account, the FHSA provides first time home buyers benefits and incentives to accelerate your savings.
Where can I open a First Home Savings Account?
1. Questrade First Home Savings Account
Questrade was the first company to launch the First Home Savings Account in Canada, which was released April 1, 2023.
The Questrade Self-Directed First Home saving Account is a self-managed account that allows you to trade stocks, options, ETFs and more.
They also have a Questwealth First Home Savings Account which is managed by investment experts who put together a diversified investment portfolio based on your risk tolerance and goals.
You can open a Questrade First Home Savings Account with a minimum deposit of $250 today!
On April 1, 2023, Questrade was the first to offer customers the First Home Savings Account in Canada.
To open a Questrade Tax-Free First Home Savings Account you must be a Canadian Resident, 18 years or older, have a valid Social Insurance Number (SIN), be a first home buyer, and fund the account with a minimum deposit of $250.
On Questrade’s website
2. TD First Home Savings Account
On August 16, 2023 TD Bank officially launched their First Home Savings Account (FHSA), a new and exciting way for first time home buyers to save up and buy their first home.
TD’s First Home Savings Account acts as a multi-holding account, meaning you can invest your money in GICs, ETFs, Mutual Funds, and stocks.
There are no monthly account fees or minimum deposit required to open a FHSA with TD
Read our TD Bank Review
As of August 16, 2023 Canadians can open a First Home Savings Account with TD Bank.
To open a TD First Home Savings Account you must be a Canadian Resident, 18 years or older, have a valid Social Insurance Number (SIN), and be a first home buyer.
On TD’s website
3. RBC First Home Savings Account
On April 20, 2023 RBC releases their First Home Savings Account across Canada.
There is no minimum balance required to open the account, plus you get access to a wide range of investment options such as GICs, Mutual Funds, ETFs, Stocks and more.
RBC officially released their First Home Savings Account on Arpil 20, 2023.
To open a RBC First Home Savings Account you must be a Canadian Resident, 18 years or older, have a valid Social Insurance Number (SIN), and be a first home buyer.
On RBC’s website
First Home Savings Account Comparisons
First Home Savings Account (FHSA) |
Tax-Free Savings Account (TFSA) |
Registered Retirement Savings Plan (RRSP) | |
|---|---|---|---|
Are contributions tax deductable?
|
YES
|
NO
|
YES
|
Withdraw limit
|
No limit. You may withdraw any amount tax free as a qualifying first home buyer.
|
NONE
|
$35k for first time home buyers.
|
Contribution Limit
|
$8,000 yearly, up to a maximum lifetime contribution of $40,000
|
$6,500 in 2023
|
18% of income earned on your tax return up to a maximum of $30,780 in 2023
|
FHSA Contributions and Deductions
Contribute up to $8,000 per year , and a maximum lifetime contribution of $40,000.
Unused contribution room in the current year will be carried forward to the next. For example, if you contribute $4,500 in 2023, then in 2024 you’ll be able to contribute $11,500 ($8,000 for the current year plus the $3,500 from previous year.)
You may claim your contributions as an income tax deduction to reduce your taxable income.
The First Home Saving Account has a lifespan of up to 15 years. Once you’ve had the account for 15 years any remaining funds must be transferred to an RRSP or RRIF.
How to Maximize Your First Home Saving Account
An FHSA works like any other kind of registered accounts (TFSA, RRSP, RRIF, LIF, etc.). You may purchase investments like publicly traded stocks, ETFs, Guaranteed Investment Certificates (GIC), bonds, and mutual funds.
You can let your investments continuously grow tax-free like an RRSP or TFSA. This account is ideal if you want to avoid capital gains or paying taxes on your investments while saving for a home.
Some financial institutions may allow you to set up automatic transfers from your chequing account to your FHSA.
Take advantage of the tax benefit and try to reach your contribution room every year.
Like an RRSP, you can use the money in your FHSA to put towards a down payment on a property.
First Home Savings Account Eligible Withdrawals
It is important to note that any withdrawal that isn’t used towards buying your first home may be subject to tax.
Any funds that are in your FHSA that aren’t being used towards your first home may be transferred to an RRSP or RRIF without affecting contribution room and without paying tax.
FAQ
Some financial institutions are already allowing people to sign up for the First Home Savings Account in Canada, while the remaining plan to release the account in 2023.
Yes, the FHSA expires after 15 from the day you opened the account or by the time you turn 71 (whichever comes first).
You can start contributing to your FHSA as soon as you open the account. You will be able to contribute $8,000 every year.
You can contribute $8,000 a year, up to a maximum lifetime contribution of $40,000.