A First Home Savings Account is a type of account available to Canadians to help them save to buy their first home. Each Canadian resident turning 18 or older during that year is eligible to open an account, and can then deposit up to $8,000 per year the account has been open, up to a maximum of $40,000 total contributions. These contributions generate a tax deduction, reducing taxes paid for that year, and can be invested and generate profits, similarly in both ways to an RRSP. When the money is withdrawn to buy a home, there are no taxes due on withdrawal.
The FHSA can remain open for a maximum of 15 years. If 15 years passes and the investor does not buy a home, the funds can be contributed into the investor’s RRSP without affecting their available RRSP contribution room.
The FHSA is an efficient and useful way to save for buying a home, and also to transfer wealth between generations – for example, from a parent or grandparent to young adult.
