First Home Savings Account ("FHSA")

The FHSA is a type of registered savings plan introduced by the federal government in 2022.  An FHSA is designed to help you save for your first home.  An FHSA combines some of the features of an RRSP and TFSA. Contributions will generally be tax-deductible, and when a qualifying withdrawal is made, the amount withdrawn is not-taxable.  You can open an FHSA starting April 1, 2023.

Who Can Open an FHSA

To open an FHSA, you must be a qualifying individual.  You are a qualifying individual if you meet all of the following requirements at the time the account is opened:

• At least 18 years of age (in certain provinces and territories, the legal age at which an individual can enter into a contract [which includes opening an FHSA] is 19 years old);
  not more than 71 years of age on December 31 of the year;
• A resident of Canada; AND
• A first-time home buyer (An individual is considered to be a first-time home buyer if at any time in the part of the calendar year before the account is opened or at any time in the preceding four years they did not live in a qualifying home [or what would be a qualifying home if located in Canada] that either (i) they owned or (ii) their spouse or common-law partner owned [if they have a spouse or common-law partner at the time the account is opened]).

A qualifying home is generally a housing unit located in Canada.

You can open an FHSA through an FHSA issuer such as a bank, credit union, or a trust or insurance company. 

Contributions to an FHSA

Since April 1, 2023, you can contribute up to $8,000 in any given year up to a lifetime contribution limit of $40,000.  The annual contribution limit applies to the calendar year and you can carry forward up to $8,000 of your unused annual contribution amount to use in a later year (subject to the lifetime contribution limit).  Excess contributions are subject to penalties similar to those imposed on overcontributions to a Registered Retirement Savings Plan (“RRSP”).

Contributions can be made from outside your RRSP or as a direct transfer from your RRSP into your FHSA.  

The contributions that you make to your FHSA may be deductible on your income tax and benefit return for the year of the contribution or a future year, similar to RRSP contributions (unlike RRSPs, contributions that you make to your FHSA during the first 60 days of the year are not deductible on your previous year’s income tax and benefit return).    More specifically, contributions made from outside your RRSP are generally tax-deductible, while direct transfers from your RRSP to your FHSA are not tax-deductible.  However, both types of contributions reduce your annual and lifetime contributions limits.

Withdrawing from and Closing an FHSA

In order to avoid unintended tax consequences, you should close all of your FHSAs before December 31 of the year in which the earliest of the following events occur:

• The 15th anniversary of opening your first FHSA;
• You turn 71 years of age; OR
• The year following your first qualifying withdrawal from your FHSA

A qualifying withdrawal is an amount received out of your FHSA where all of the following conditions are met:

• You must be a first-time home buyer (A "first-time home buyer" for the purpose of making a qualifying withdrawal is different than a "first-time home buyer" for the purpose of opening an FHSA.  For purposes of a qualifying withdrawal, you will be considered to be a first-time home buyer if you did not, at any time in the current calendar year before the withdrawal [except the 30 days immediately before the withdrawal] or at any time in the preceding four calendar years, live in a qualifying home [or what would be a qualifying home if located in Canada] as your principal place of residence that you owned or jointly owned);
• You must have a written agreement to buy or build a qualifying home with the acquisition or construction completion date of the qualifying home before October 1 of the year following the date of the withdrawal;
• You must not have acquired the qualifying home more than 30 days before making the withdrawal;
• You must be a resident of Canada from the time that you make your first qualifying withdrawal from one of your FHSAs until the earlier of the acquisition of the qualifying home, or the date of your death; AND
• You must occupy or intend to occupy the qualifying home as your principal place of residence within one year after buying or building it.

A qualifying withdrawal (defined directly above), as well as certain other limited withdrawals and certain limited transfers to an RRSP or Registered Retirement Income Fund (“RRIF”), do not have to be included in your income for tax purposes.  In all other cases, withdrawals must be included in your income for income tax purposes.

For further details, please contact your Crowe BGK advisor.