Announced in the 2022 federal budget, an FHSA is a new type of registered savings plan. It aims to help first-time home buyers save, thereby facilitating access to homeownership.
An FHSA, in a nutshell, allows you to:
Also, unlike withdrawals made from an RRSP under the Home Buyers’ Plan (HBP), funds withdrawn from an FHSA do not have to be paid back.
To qualify for an FHSA, you must:
Yes. At the time of withdrawal to purchase a first home, the account holder must confirm that they still qualify for their FHSA. Please note that this only affects the FHSA account holder and that, once a proof of or agreement to purchase (i.e. an offer) has been submitted, they may withdraw the funds tax-free, even if their spouse is a homeowner.
The maximum contribution room for an FHSA is $8,000 per year, per eligible person. You can contribute a lifetime limit of $40,000 over a maximum of 15 years following the opening of your FHSA. Your contribution room accumulates annually as of the year of opening. You will therefore need at least five years to reach the limit of $40,000.
Once your FHSA is open, you can also carry forward any unused contribution room. However, the maximum unused amount you can contribute each year is limited to $8,000. Your maximum annual contribution could therefore increase to $16,000 in a year, that is, $8,000 of contribution room for the current year plus the maximum of $8,000 of unused contributions carried over from preceding years.
|
Would you like to help your child save for their FHSA? Even if you cannot contribute directly to someone else’s FHSA, you can give your child a monetary gift, which they can then contribute to their FHSA. This is a good strategy for parents who want to help their children become homeowners. |
Unlike RRSPs, which allow contributions up to 60 days after the end of the fiscal year, the deadline to contribute to your FHSA is December 31 of each year.
FHSA deductions can be carried forward indefinitely, even after the account has been closed. It could therefore be advantageous to carry these deductions forward if you foresee your income increasing in the coming years. Do not hesitate to discuss this option with your advisor to find out if it is right for you.
You can contribute to your FHSA until December 31, 15 years after opening your account or until you turn 71 years of age.
After being used to purchase a property, your FHSA will remain open until December 31 of the year following your first qualifying withdrawal (as defined in the regulations). For example, if you withdraw part of your FHSA in 2032, it must be closed by the end of 2033 at the latest.
If you do not use your FHSA during the participation period, you can:
|
It is possible to open more than one FHSA, but your participation period is limited to 15 years after opening your first account. If you have more than one FHSA, your contribution limit remains at $8,000 per year for a lifetime limit of $40,000. |
No, withdrawals made from an FHSA in order to purchase a first qualifying home (as defined in the regulations) are not taxable. This includes, if applicable, the returns generated through an FHSA, which could allow you to increase your down payment.
Absolutely! Using your RRSP to take advantage of the Home Buyers’ Plan (HBP) remains beneficial.
Remember that the HBP allows you to use the funds in your RRSP to buy a first home. The withdrawal limit is $35,000. You then have 15 years to pay the funds you withdrew back to your RRSP.
Here are two examples of situations where an RRSP can fit into your homebuying strategy:
Note: You can transfer funds from your RRSP to your FHSA. However, in this case, you cannot deduct these funds from your income a second time and you will not recover the contribution room you had already used toward your RRSP.
A TFSA is also an interesting savings vehicle for several reasons. Here are a few:
|
The strategy to choose depends on your capacity to save and the timeframe you have to purchase your home. Speak with an advisor to find the strategy that best fits your situation. |
| FHSA | RRSP | TFSA | |
| Main objective | Buying a first home | Savings and retirement | Miscellaneous savings |
| Secondary objective | Savings and retirement | HBP | Savings and retirement |
| Minimum age | 18 years | None | 18 years |
| Maximum age | 71 years | 71 years | None |
| Annual contribution limit |
$8,000 per year $40,000 lifetime maximum |
18% of your previous year’s income or the current year’s annual limit. | $7,000 in 2024 |
| Maximum participation period |
Closing no earlier than December 31 of the year following either:
|
Up to age 71 | None |
| Plan conversion | Can be transferred to an RRSP or RRIF. | Possible with an RRIF, no later than age 71 | No |
If you live with your spouse in a qualifying home that he or she owns, you cannot open an FHSA.
If you do not live with your spouse and you meet all FHSA eligibility criteria, including not having lived in a qualifying home that you owned in the current year or in the past four years, you may open an FHSA.
Note: Whether or not you live with your spouse, if you opened an FHSA before your relationship with him or her began, you can keep contributing and use it to purchase your first property.