The First Home Savings Account is the most powerful new registered account in a generation. Tax-deductible contributions AND tax-free withdrawals — the best of both worlds.
Launched in 2023, the First Home Savings Account combines the tax deduction of an RRSP with the tax-free withdrawals of a TFSA. Contribute up to $8,000/year (deductible from your income), invest it however you want, and withdraw the entire balance — including all growth — completely tax-free when you buy your first home.
No other account in Canada offers both a tax deduction on the way in AND tax-free growth on the way out. If you're a first-time home buyer (or might be one day), this account is a no-brainer.
Annual contribution limit is $8,000. Lifetime limit is $40,000. Unused room carries forward up to $8,000/year (so max $16,000 in any single year). Room only accumulates after you open the account.
Contributions reduce your taxable income (like an RRSP). All growth is tax-free. Qualifying withdrawals for your first home are completely tax-free (like a TFSA). Best of both worlds.
You can use BOTH the FHSA ($40,000) and the RRSP Home Buyers' Plan ($60,000) for the same home purchase. That's up to $100,000 per person — $200,000 as a couple — from tax-advantaged accounts.
The account can stay open for up to 15 years from when you open it (or until you turn 71). If you don't buy a home, you can transfer the balance to your RRSP tax-free — no contribution room needed.
Even with $0 to contribute, open the account now. Carry-forward room only starts accumulating after the account exists. Every year you wait is $8,000 of room you can never get back.
If your purchase is 5+ years out, invest in equities (XEQT, VEQT). The tax-free growth over time can add tens of thousands to your down payment. Shift to safer holdings as your purchase date approaches.
You don't have to claim the tax deduction in the same year you contribute. If you expect higher income next year, contribute now for the tax-free growth but save the deduction for when it's worth more.
Max your FHSA ($40K), then use the RRSP HBP ($60K) on top. The FHSA withdrawal is permanent and tax-free. The HBP withdrawal must be repaid over 15 years, but it's still interest-free financing for your down payment.
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