What is FHSA contribution room and how does it work?

Direct answer

The First Home Savings Account (FHSA) is a federal tax-deferred savings vehicle for first-time home buyers, opened April 1, 2023. Contribution room is $8,000 per year up to a $40,000 lifetime maximum; up to $8,000 of unused room can be carried forward one year. Contributions are tax-deductible like an RRSP, and qualifying withdrawals to buy a first home are tax-free like a TFSA, combining the best feature of both. To qualify, you must be 18+, a Canadian resident, and never have lived in a home you (or your spouse) owned in the year of opening or the four previous calendar years. The account must be opened by December 31 of the year you turn 71 and used within 15 years (closes after the earlier event). FHSA stacks with the Home Buyers' Plan (HBP): you can use both on the same purchase, withdrawing up to $60,000 from your RRSP via HBP and up to $40,000 from your FHSA, for $100,000 of tax-deferred down-payment capacity. Withdrawals NOT used for a qualifying home purchase are added to taxable income (or transferred to your RRSP without affecting RRSP room). For a $700K Surrey townhouse the minimum down payment is $45,000 (5% of the first $500,000 and 10% of the rest), so a fully-funded $40K FHSA covers most of it.