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The FHSA Advantage: Tax Savings Every First-Time Buyer Should Know

  • Feb 6
  • 2 min read

As Canadians plan for the upcoming tax season, it’s important to explore underused tax strategies that can maximize savings. One of the newest tools available is the First Home Savings Account (FHSA), designed to help first-time homebuyers save for a home while receiving tax advantages.


What is an FHSA?

The FHSA is a registered account that allows eligible first-time homebuyers to save up to $8,000 per year on a tax-free basis, with a lifetime contribution limit of $40,000. Contributions are tax-deductible, similar to an RRSP, and withdrawals used to purchase a first home are tax-free, similar to a TFSA.


The FHSA was introduced in April 2023, and eligible individuals can open an account if they are Canadian residents, at least 18 years old, and have never owned a home. Annual contributions are tracked, and unused contribution room can carry forward to future years, allowing flexibility for planning ahead.


FHSA Planning: Inception Date vs. Late Start

Consider the impact of opening an FHSA at inception versus starting later:


  • Opened at Inception (2023): An individual who opened an FHSA in 2023 could contribute $8,000 immediately, claim a deduction on their 2023 taxes, and continue contributing each year to maximize the $40,000 lifetime limit. Over multiple years, this approach allows for greater tax savings through deductible contributions and the potential for tax-free growth on investment earnings within the account.


  • Opened Later (2025 or beyond): Individuals who open an FHSA after 2023 can still take full advantage of the program by contributing annually once the account is established. While earlier contribution years cannot be recovered, future contributions continue to build tax-deductible savings and allow for tax-free investment growth. With proper planning, taxpayers can strategically maximize deductions in higher-income years and use the FHSA effectively toward a first-home purchase.


Recommendations for Optimal Tax Savings

To make the most of an FHSA, Canadians should:

  1. Open an account as early as possible after becoming eligible.

  2. Maximize annual contributions whenever financially feasible.

  3. Track contributions carefully to avoid exceeding limits.

  4. Consider combining FHSA contributions with other tax strategies for first-time homebuyers, such as the Home Buyers’ Plan (HBP).


How K Liu Accounting Services Inc. Can Help

Navigating new tax accounts and maximizing available deductions can be complex. At K Liu Accounting Services Inc., we provide comprehensive tax and accounting services, including guidance on FHSA contributions, first-time homebuyer tax strategies, and long-term financial planning. Whether you need a tax accountant, a bookkeeping firm, or a virtual accountant, our team helps you optimize savings and make informed decisions this tax season.


For reliable support, reach out to our experts at K Liu Accounting Services Inc., a trusted accounting services provider serving Winnipeg and Canada-wide. Let us help you take full advantage of underused tax strategies like the FHSA for maximum benefits.


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