Tax-Free First Home Savings Account (FHSA)

Save up to $40,000 in a Tax-free First Home Savings Account (FHSA)

Across Canada, increasing housing prices have made home ownership unaffordable for many.

Today we discuss the recent announcement by the federal government of Canada introducing a new Tax-Free First Home Savings Account (FHSA) that allows people to save money without paying taxes on any interest earned. The government says the goal is to give young families a way to build wealth while saving for a down payment on a house and is set to be implemented in 2023.

This new registered plan would give prospective first-time home buyers the ability to save $40,000 on a tax-free basis. Like a Registered Retirement Savings Plan (RRSP), contributions would be tax-deductible, and withdrawals to purchase a first home—including from investment income—would be non-taxable, like a Tax-Free Savings Account (TFSA). The key design features of the FHSA, including an $8,000 annual contribution limit in addition to a $40,000 lifetime contribution limit.

The FHSA is the latest in a long list of investment and savings accounts available to Canadians for saving towards home ownership and retirement goals. At its core, this plan attempts to supercharge a young person’s ability to save for a down payment.

In this episode, Marcelo and Keith review why the government is putting the FHSA in place, who can benefit from it, how it works, changes that the government might make before finalizing the FHSA, how it differs from the Home Buyers’ Plan (HBP), and more! If you’re thinking about opening a tax-free savings account, there are some things you should consider before doing so.

Thank you for listening!

Why invest in an Interest-Free Savings Account?

• Introducing the Tax-Free First Home Savings Account (FHSA) (1:15)
• Why the FHSA was created (2:48)
• How the FHSA works (4:13)
• Tax implications of your FHSA (5:58)
• Details of the FHSA still under review (8:00)
• Key differences between the FHSA and the Home Buyers’ Plan (HBP) (11:51)
• Who will benefit the most from the FHSA? (13:18)
• How young people should be thinking about saving for their future (14:38)
• The ongoing problem with the supply side of the housing market (17:03)
• Our takeaways on the impact of FHSA’s on the Canadian housing problem (19:27)