To open an FHSA, you must be a **resident of Canada for tax purposes**. You do not need to be a Permanent Resident (PR) or Citizen; temporary residents (such as workers on PGWP or closed permits, and students) who file Canadian tax returns are eligible.
What is the FHSA?
The First Home Savings Account (FHSA) is a registered account that combines the best tax features of an RRSP and a TFSA:
- Tax-deductible Contributions: Contributions you make to your FHSA reduce your net taxable income for the year, giving you a tax refund (similar to an RRSP).
- Tax-Free Growth: Any investment growth (interest, dividends, or capital gains) earned inside the FHSA is completely tax-free.
- Tax-Free Withdrawals: When you withdraw money from the FHSA to purchase your first home, the entire withdrawal is **completely tax-free** (similar to a TFSA).
Contribution Limits & Rollover Rules
CRA enforces strict annual and lifetime contribution limits on the FHSA:
- Annual Limit: You can contribute up to **$8,000 CAD** per calendar year.
- Lifetime Limit: The maximum lifetime contribution limit is **$40,000 CAD** per person (allowing a couple to combine $80,000 CAD toward a down payment).
- Rollover: If you open an account and do not contribute the full $8,000, you can carry forward the unused amount to the next year, up to a maximum of **$8,000** (e.g. you can contribute a maximum of $16,000 in a single year if you carried over the previous year's room).
- Penalty for Over-contributing: A **1% monthly penalty tax** is charged by the CRA on any excess contributions.
Qualifying First Home Requirements
To make a tax-free withdrawal, your purchase must meet CRA definitions:
- First-Time Buyer Definition: You must not have lived in a home that you owned (or that your spouse or common-law partner owned) at any time during the current calendar year or the preceding four calendar years.
- Written Agreement: You must have a written agreement to buy or build a qualifying home in Canada before withdrawing the funds.
- Principal Residence: You must intend to occupy the home as your principal place of residence within one year of buying or building it.
This guide compiles official CRA guidelines and tax definitions for the FHSA sourced directly from:
• Canada Revenue Agency (CRA) First Home Savings Account portal: canada.ca/cra-fhsa
• CRA FHSA Definitions and Residency Rules: canada.ca/cra-fhsa-open