What is a First Home Savings Account?

A First Home Savings Account (FHSA) is a registered account in Canada that helps first-time homebuyers save for a down payment, tax-free.

It combines features of an RRSP and a TFSA:

• Contributions are generally tax-deductible (like an RRSP)

• Investment growth and qualifying withdrawals for a first home are tax-free (like a TFSA)

As of now, you can contribute up to $8,000 per year, to a lifetime maximum of $40,000.

KOHO High Interest Savings

KOHO doesn’t currently offer registered accounts like the FHSA, so you’d open an FHSA with a bank or investment platform.

But you still need a place for flexible, short-term cash while you build your down payment strategy.

That’s where KOHO High Interest Savings can fit in:

• Earn a high interest rate on money you’re setting aside

• Keep funds liquid and easy to move through the app

• Use KOHO for everyday or short-term savings, and an FHSA for your tax-advantaged, first-home bucket

How a First Home Savings Account Works

Here’s the FHSA in plain terms:

• Contribution limits: Up to $8,000 per year, with a $40,000 lifetime limit. Unused room can typically be carried forward (up to $8,000).

• Tax treatment: Contributions can reduce your taxable income.

• Investments: You can usually hold things like cash, GICs, mutual funds, ETFs, and stocks inside an FHSA, similar to a TFSA or RRSP.

• Time limit: You generally have up to 15 years from opening your first FHSA (or until the end of the year you turn 71, whichever comes first) to use it for a qualifying home. If you don’t, you can transfer it to an RRSP/RRIF tax-free or withdraw it as taxable income.

Who Can Open an FHSA?

To open an FHSA, you typically must:

• Be a Canadian resident

• Be at least 18 (or the age of majority in your province)

• Be a first-time homebuyer, meaning you haven’t owned a qualifying home where you lived in the current year or the previous four calendar years

FHSA vs Other Savings Options

Alongside an FHSA, many people still use:

• A TFSA for flexible, tax-free savings that aren’t strictly tied to a home

• An RRSP (plus the Home Buyers’ Plan) for additional down payment flexibility

• A high interest savings account for cash you might need sooner or don’t want locked into a registered plan