From April 1, 2023, Canadian financial institutions can start offering the new Tax-Free First Home Savings Account (FHSA). The federal government introduced it in Budget 2022 to help first-time buyers save for a down payment.
First Home Savings Account: contribution limits
How it works
- You can contribute up to $8,000 a year, up to a lifetime limit of $40,000, within 15 years of opening the account.
- Contributions are tax-deductible, like an RRSP.
- Withdrawals to buy a first home, including investment income, are not taxed, like a TFSA.
- Canadian residents aged 18 to 71 can open one. Unused room up to the $8,000 annual maximum can be carried forward.
- The FHSA can be combined with the RRSP Home Buyers’ Plan.
Why it matters in Calgary
For a couple, two accounts can add up to $80,000 for a down payment, plus the tax refunds along the way. With Calgary’s entry-level homes in high demand, a larger down payment can make a real difference to what you qualify for.
Our advice: if you might buy within the next few years, open an account early so the contribution room starts building, and talk to your bank or advisor about how it fits with your RRSP.
Who counts as a first-time buyer
To open an FHSA, you must be a resident of Canada, at least 18 years old and a first-time home buyer. Under the rules the Department of Finance described when it released the draft legislation in August 2022, that means you have not lived in a home you owned in the current calendar year before opening the account or in any of the four previous calendar years. Ownership is defined broadly, so a home owned through a spouse or a trust may count. If you sold a home five or more years ago and have rented since, you may qualify again.
How carry-forward works
Unused room carries forward, up to $8,000. The Department’s own example: if you contribute $5,000 in 2023, you can contribute $11,000 in 2024, which is the regular $8,000 plus the $3,000 you did not use. Carry-forward starts only once you open your first account, so opening early matters even if you cannot contribute much yet.
A worked example from the federal budget
Budget 2022 described a couple, Matthew and Taryn, who each save the $8,000 maximum every year starting in 2023. Each earns between $50,000 and $100,000, and each receives an annual federal tax refund of $1,640 thanks to the deduction. By the end of 2027 they have a combined $90,000, including tax-free investment income, and they can withdraw it tax-free for their down payment. They can also claim the doubled First-Time Home Buyers’ Tax Credit, which provides up to $1,500 in tax relief.
What it means for Calgary buyers
In March 2023, CREB’s benchmark price for an apartment condo in Calgary was $293,500 and for a row home $378,100. For buyers in these price ranges, a few years of FHSA savings can make up a meaningful share of a down payment. For a couple saving in two accounts, the lifetime limit is $80,000 before investment growth.
Practical steps
- Open the account soon: room starts building only from the year you open it.
- Think about the tax refund: putting the refund back into the FHSA or a TFSA speeds up your savings.
- Choose investments to match your timeline: if you plan to buy in two years, a volatile investment may not be the right fit.
- Talk to a professional: how the FHSA works with the RRSP Home Buyers’ Plan depends on your situation.
Not every bank or credit union offered the account on the first day, so if yours does not yet, ask when it will.
