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FHSA Canada – Guide to the First Home Savings Account

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The FHSA has the word “savings” in its title but it’s actually a registered investment account. Usually, when you earn income on investments that you hold, you have to pay income tax on that investment income. However, there are some registered investment accounts that provide tax benefits, and the FHSA Canada is the latest of these accounts. It combines some of the benefits of the Tax-Free Savings Account (TFSA) and some benefits of the Registered Retirement Savings Plan (RRSP). The FHSA Canada allows you to reduce your taxable income and also grow your money tax-free, as long as the money is used to buy a home.

FHSA Contribution Limits

The FHSA, like the TFSA and RRSP, has an annual contribution limit of $8,000. 

There is also a  lifetime contribution limit of $40,000. 

The lifetime contribution limit was chosen as it represents about five to six percent of the average home price in Canada which is also roughly the minimum down payment for a home under a million dollars. 

On a yearly basis starting in 2023, you can fund the account with up to $8,000.

Any unused portions of that limit will carry forward up to a maximum of eight thousand dollars to use in the following year.

What Types of Investments Can You Hold in Your FHSA?

What kinds of investments can you hold within your FHSA account?

The answer is that you can hold the same types of investments as in your TFSA or RRSP. 

That is:

  • Stocks
  • Bonds
  • Mutual Funds
  • Exchange-traded Funds (ETFs), or
  • Guaranteed Investment Certificates (GICs)

You Can Use the FHSA and the HBP Together

The FHSA was designed so that the $40,000 plan limit could cover the down payment at 5% down payment for the average home in Canada.  

However, that doesn’t completely help people in markets like Toronto, Vancouver or even here in Victoria.

Thankfully, you can combine the use of your FHSA with the RRSP Home Buyers’ Plan during the purchase of a qualifying home.

The Home Buyers’ Plan (or HBP) is a program offered by the Canadian government that allows first-time home buyers to withdraw up to $35,000 from their RRSP tax-free to use towards the purchase of a home.

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