Last year, we saw the introduction of the First Home Savings Account (FHSA), a measure established by the government in an effort to help first-time homebuyers save money for their first home purchase in Canada. 

The FHSA combines the attractive features of both a TFSA and RRSP. Annual contributions are tax-deductible and are limited to $8,000 per year with a lifetime maximum of $40,000. Any unused contribution room is carried forward to the following year. Unlike the RRSP and TFSA, the contribution room will only start accumulating in the year the account is opened.

The account can remain open for up to 15 years or until the end of the year you turn 71, whichever comes first. Any balance not used for a qualifying home purchase at that point can be transferred to your RRSP or RRIF. 

One of the key advantages of the FHSA is its flexibility, some features include:

• As long as you haven’t owned or jointly owned a home in Canada in the current year and the past four calendar years, you are eligible to open an account;
• Funds inside the account grow tax-free and remain tax-free on a qualifying withdrawal;
• You may be able to transfer funds up to $8,000 from your RRSP to your FHSA on an annual basis without any immediate tax consequences; and
• Unlike the Home Buyers Plan (HBP), withdrawals are not required to be repaid back into the account.

Combining the use of an FHSA and an HBP is ideal to maximize savings on a first home purchase. Talk to your First Avenue advisor to understand the options and ideal savings plan for you or your dependents. You can review the detailed summary of the rules here.