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The Northwood Perspective

First Home Saving Account (FHSA)

Eric Feltrin

Canada’s newest type of  tax free investment account called the Tax-Free First Home Savings Account (or “FHSA”) was officially launched on April 1st. The goal is to help first-time home buyers  save up faster for a down payment to purchase their first home amid soaring national home prices.

The account acts like an RRSP where contributions are tax deductible (contributions to a TFSA are not deductible). All investment income including interest, dividends and any capital gains are tax-free, similar to an RRSP and TFSA, and the full account value can be withdrawn tax-free (under certain conditions) to purchase a home. For this reason, the FHSA is an attractive place for certain individuals to allocate their savings potentially as a priority over maximizing their TFSA and RRSP contributions depending on their personal situation and goals.

Included below is an overview of the key features of the FHSA:



                o  Up to $8K of unused contribution room can be carried forward to use in a later year

                o  This contribution applies against your available FHSA contribution room

                o  The contribution is not tax deductible again (as a new contribution would be)

                o  The transfer does not re-instate your RRSP contribution room previously utilized

Tax Implications

                o   Contribution room and deductibility are based on calendar years

                o   It is unclear currently if this will apply to dividends earned from foreign investments (CRA will release more clarity at some point)

                o   This is a useful strategy for contributors who expect their income to rise in future years, as they can utilize the deduction in a year when they are subject to a higher marginal tax bracket.


                o   The account holder must intend to occupy the home within one year of purchasing it (it can’t be used as a rental property)

                o   If there are funds that weren’t used to fund the purchase, they can instead be transferred to an RRSP account

                o   If no home is bought within 15 years, the account value can be transferred to an RRSP. This transfer does not reduce RRSP contribution room or require you to have available RRSP contribution room


Additional Points

Using the FHSA to invest savings on the journey toward home ownership can give first-time home buyers a much-needed leg up to enter the housing market. Tax-free contributions to the FHSA and RRSP through the homebuyer’s plan allow $75K of tax-free funds per person ($150K per household) to be used as a down payment on a home. This is enough to fully fund a 20% down payment on a $750K home (the average price of a home in Canada is $720,000 in 2023).



Eric Feltrin

Eric is a member of the client service team at Northwood, working with client families in the areas of financial planning, investment management, and taxation. Prior to joining Northwood, Eric worked at PwC LLP within their assurance services group, specializing in serving public and private clients within the asset management and real estate industries.

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