First Home Savings Accounts (FHSA)

In the market to buy your first home?  The First Home Savings Accounts (FHSA) is a great way to get you on the right track.

What is the FHSA?

A First Home Savings Account is a new type of savings account designed to help Canadians save for the purchase of their first home.  Expected to launch in 2023, the new FHSA acts as a hybrid between an RRSP and a TFSA.

Contributions going into the FHSA are tax-deductible from your income just like an RRSP.

Withdrawals coming out of the FHSA are tax-free just like a TFSA providing you are using the funds to purchase your first home.

Opening/Closing an Account

To open a FHSA you must be a resident of Canada and be over the age of 18.  You must also be a first-time home buyer meaning you have not lived in a home that was owned solely or jointly with a spouse or common law partner within the current calendar year or the preceding 4 calendar years.

A FHSA must be closed upon the 15th anniversary date of when the account was initially opened, or by the end of the year in which the plan holder turns 71.

When it comes time to withdrawal funds, the plan holder must have a written agreement to buy or build a qualifying home.

Limits

Annual contribution limit of $8,000/year and a lifetime maximum contribution limit of $40,000.

Unused contribution amounts can only begin accumulating once the FHSA is opened.

Individuals can only carry forward unused portions of their annual contribution limit up to a maximum limit of $8,000.

Individuals are allowed to hold more than one FHSA, but must keep in mind their annual contribution limits and lifetime maximums.

Tax Details

Unlike an RRSP, individuals are not permitted to claim an income tax deduction for the previous tax year for contributions made within the first 60 days of the calendar year.

An individual is not required to claim their tax deduction in the same year that the FHSA contribution is made.  Tax deductions can be carried forward indefinitely to be used in higher tax years.

Individuals are allowed to transfer funds from an RRSP to an FHSA on a tax-free basis, subject to their plan maximums.  (Transfers from an RRSP to a FHSA are not tax deductible)

No spousal FHSA contributions are allowed.

Unused FHSA funds can be transferred tax-free to an RRSP or RRIF without needing additional RRSP contribution room.

More resources on FHSA's can be found below.

First Home Savings Account (FHSA) - Nesbitt Burns

First Home Savings Account (FHSA) - Canada.ca

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