You can open a First Home Savings Account (FHSA) and make tax-deductible contributions of up to $8,000 annually, to a lifetime maximum of $40,000. If you don’t contribute the full $8,000 in a single year, the balance can be carried forward and added to next year’s contribution amount. This means that if you contribute less than $8,000 within the year, you can contribute the unused amount in the subsequent year in addition to the $8,000 annual contribution limit and contribute a maximum of $16,000 in a given year.
Your funds and any investment earnings can stay in the FHSA and grow tax-free with every contribution you make until you’re ready to buy your first home. As long as you use the funds for your qualifying first home, you won’t have to pay any taxes on your FHSA withdrawal(s).
The funds in your FHSA have to be used by December 31 of the 15th year after opening the account, or by December 31 of the year you turn 71, whichever comes earlier. If you have not used the funds in your FHSA by that time, you can transfer the funds from your FHSA on a tax-free basis to your Registered Retirement Savings Plan (RRSP) without impacting your RRSP contribution room, or to your Registered Retirement Income Fund (RRIF). Otherwise, you can withdraw funds from your FHSA, but your withdrawal will be taxed.