March 13, 2023 by Scott Allan

First Home Savings Plan (FSHA) – is a registered savings plan to help Canadians save for the first home. Allowing prospective buyers to save up to 40,000 tax-free. The earliest date that this account can be offered is April 1, 2023.

How does it work?

• Contributions are tax deductible like an RRSP, unlike an RRSP contribution made in the first 60 days can not be attributable to the previous years taxes.
• Income and Capital gains are tax-free like a TFSA.
• Lifetime limit of 40,000 with an annual limit of 8,000 in any year including 2023.

Who’s eligible?

• To open an FHSA you must be an individual resident of Canada at least 18 years of age, and not turning 72 or older in the year. You must be a first time home buyer, meaning you, or your spouse or common law partner did not own a qualifying home that you lived in as your principal residence at any part of the calendar year before the account is opened of the proceeding four calendar years.

Withdrawals and Transfers

• Qualifying withdrawal to buy a home are tax free.
• Left over funds can be transferred to a FHSA RRSP or RRIF on a tax-free basis, with out affecting your contribution limits.

Home Buyers Plan (HBP) – the home buyers plan (HBP) is a program that allows you to withdrawal up too $35,000 interest free from your Registered Retirement Savings Plan for 15 years, to buy or build a home. You must pay back the loan from you RRSP in the 15-year time period.

Comparing the FHSA and HBP

HBP are borrowed funds from your RRSP and must be repaid in 15 years. Whereas FHSA withdrawals are tax free and do not need to be re-paid. If you don’t buy a home in the 15-year time, the funds can transfer to your RRSP effectively creating additional RRSP room by starting to contribute to your FHSA.