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What is an FHSA?
An FHSA is a tax-free savings account designed to help future homeowners save for the purchase of a qualifying first home in Canada.
Combining the advantages of an RRSP and a TFSA, the FHSA gives you a deduction that reduces your annual taxable income and allows you to generate tax-free returns.
You can then use the accumulated funds to finance the purchase of a first home without having to pay taxes on withdrawals, and without having to repay the amounts withdrawn from the FHSA.
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Eligibility criteria
• Must be a Canadian resident.
• Must be of legal age in your province of residence.
• Must not be over 71 years of age as of December 31 of the current year.
• Must not have had a qualifying home in Canada as your principal place of residence that you or your spouse owned during the part of the calendar year preceding the opening of the FHSA or during the preceding four calendar years.
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Contribution deadline
The FHSA contribution deadline is December 31 of each year.
Contribute online*Available if you have already opened an FHSA.
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Contribution room
You can contribute up to $8,000 per year to your FHSA, for a maximum of $40,000 during your lifetime.
You can also carry forward up to $8,000 of unused contribution room from one year to the next, for a maximum annual contribution of $16,000.
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Tip
Contributing to an FHSA reduces your taxable income and may entitle you to a tax refund.
Key advantages of the FHSA
- As with an RRSP, your FHSA contributions reduce your annual taxable income.
- Your savings and returns generated in the FHSA are tax free upon withdrawal.
- Unlike RRSP withdrawals under the Home Buyers’ Plan (HBP), sums withdrawn from an FHSA for the purchase of a first home do not have to be repaid.
- You can carry forward up to $8,000 of unused contribution room, for a maximum annual contribution of $16,000.
- You can transfer funds from your FHSA to your RRSP or your RRIF if you are not using them.
Did you know?
To purchase your first home, you can combine savings with returns from your TFSA and your FHSA, and up to $60,000 from your RRSP through the Home Buyers’ Plan (HBP). An advisor can work with you to determine the best strategy for you.
| 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 | Age of majority | None | Age of majority |
| Maximum age | 71 | 71 | 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 |
| Annual contribution period | January 1 to December 31 | March 1, 2024 to February 28, 2025 | January 1 to December 31 |
| Maximum participation period | Close on December 31 of the year in which the earliest of the following events occur: • The fifteenth anniversary of your first FHSA • The year following your first eligible withdrawal • Your 71st birthday |
Up to age 71 | None |
| Plan conversion | Can be transferred to a RRIF or RRSP with no implications | Possible with a RRIF, no later than age 71 | No |
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Four types of investment for your FHSA
Choosing iA for your FHSA is choosing the company that has been first in net segregated fund sales in Canada since 2016. Our funds are managed by top portfolio managers and follow the most innovative market trends. Different investment options are available based on your investor profile and your risk tolerance.
Segregated funds
Segregated funds are like mutual funds but offer many advantages, including guarantees that protect your investments against market downturns.
Guaranteed interest funds
Guaranteed interest funds offer a fixed interest rate that is guaranteed for the life of the investment. They guarantee 100% of your capital at maturity.
High interest savings account
Simple and accessible, the high interest savings account allows you to save risk-free based on the interest rate in force.
Daily interest funds
The interest in the Daily Interest Fund (DIF+) is earned in your investments on a daily basis and is paid monthly.
Frequently asked questions
What is the maximum participation period for the FHSA?
You can keep your FHSA until December 31 of the 15th year after it was opened or until December 31 of the year you turn 71.
If you use the funds in your FHSA to purchase a home, it will remain open until December 31 of the year following the first eligible withdrawal. For example, if you make a withdrawal in 2031, your FHSA must be closed by the end of 2032.
If you don’t use the funds in your FHSA during the participation period, you can usually transfer them to your RRIF or RRSP without affecting your unused deductions. You can also withdraw the remaining funds, which will then be taxed according to your tax bracket.
Can I have more than one FHSA?
Yes, you can have more than one FHSA. However, you must ensure that your total contributions do not exceed the $40,000 lifetime limit or the $8,000 in annual contributions to which you are entitled.
Please note also that your participation period begins when you conclude your first contract. You will therefore have to close all your FHSA accounts once the participation period has elapsed.
Can I contribute to my child’s, a family member’s or a friend’s FHSA?
You cannot contribute directly to your child’s, a family member’s or a friend’s FHSA since only the FHSA holder can contribute.
However, you can make a donation to your child, a family member or a friend, who can then use it to contribute to their own FHSA.
Am I penalized if I exceed the maximum contribution allowed?
Yes. If you exceed your contribution limit, you will have to pay a penalty of 1% of the excess amount for each month there is a surplus in the account.
Please note that unlike RRSPs, you are not allowed an excess of $2,000 before you are penalized.
Once I’ve contributed, can I carry forward my tax deductions to another year?
Yes, as with an RRSP, you can carry forward unused deductions to future years.
This could be a good strategy to consider if you expect a significant increase in your income in the years to come. For example, if you finish your studies and start your career.
My spouse is already a homeowner. Can I open an FHSA?
If your spouse is a homeowner, you cannot open an FHSA as FHSA eligibility requires that neither you nor your spouse must have owned a home in Canada in the past four years, nor in the current year.
However, if you opened an FHSA before becoming the spouse of a homeowner, you can continue to contribute to your FHSA and use it to purchase your first home. Only the FHSA holder must meet the eligibility criteria in this context.
If you have any doubts, please don’t hesitate to consult an advisor to gain a full understanding of the details specific to your situation.
Can I combine my FHSA and my RRSP (under the HBP) to purchase my first home?
Yes. You can combine contributions with returns from your FHSA, and up to $60,000 from your RRSP, to purchase your first home in Canada.
You can use this approach to maximize your down payment on your first home. Talk to your advisor about the best strategy for you.
What is the difference between an FHSA and a TFSA for first-time home buyers?
The FHSA is specifically designed to help you save for the purchase of your first home, whereas the TFSA is a savings vehicle that can be used for a variety of projects, including the purchase of your first home.
Please note that first-time home buyers can combine savings from their FHSA, TFSA and RRSP under the HBP.
How do I open an FHSA?