Canada’s new Tax-Free First Home Savings Account (FHSA) allows first-time buyers to save up to $8,000 tax-free annually – up to a $40,000 lifetime limit – for the purchase of a first home. Contributions are tax-deductible similar to a Registered Retirement Savings Plan (RRSP), and withdrawals are non-taxable like a Tax-Free Savings Account (TFSA).

• The new FHSA program took effect on April 1, 2023, but many banks are not yet equipped to offer it. Implementation of the account is complex due to tax implications, and some are still awaiting tax reporting guidelines from the Canada Revenue Agency.
• First-time homebuyers must be a Canadian resident, at least 18 years old, and not have owned a qualifying home  that was used as a principal residence in the four preceding years.
• The FHSA allows investors to invest in mutual funds, publicly traded securities, government and corporate bonds, and guaranteed investment certificates (GICs), while prohibited investments include non-arm’s length investments and assets.
• Withdrawals from the account are tax-free if used for a qualifying first home purchase, either in a single lump sum or series of withdrawals.

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