What's a First Home Savings Account (FHSA)?
Work towards your goal of buying your first home with a First Home Savings Account (FHSA)!
Available at BVCU later this year, the FHSA is a new registered plan that can help you save for your first home tax-free. Check out the key features as well as all the other facts about FHSAs before they become available!
What you need to know about FHSA
- Eligibility: Canadians who are 18+ and haven’t owned a home or lived in a home owned by their spouse or common-law partner, in the current calendar year and previous four calendar years.
- Contributions: $40,000 lifetime limit, subject to an annual contribution limit of $8,000. Contributions are tax deductible.
- Qualified Holdings: Can hold the same types of investments that are available for TFSAs. All investment growth is tax-sheltered.
- Withdrawals: Allows you to make tax-free withdrawals for a single property purchase. Amounts that are withdrawn for other purposes are taxable.
- Maturity: If FHSA funds have not been used for a qualifying first home purchase within 15 years of first opening an FHSA, the account must be closed, or funds transferred into an RRSP or RRIF.
- Transfers: Can transfer funds from an FHSA to another FHSA, RRSP or a RRIF on a tax-free basis. Also, individuals can transfer an RRSP to an FHSA on a tax-free basis, subject to FHSA contribution limits.
- Beneficiaries: Can name a spouse or common-law partner as successor account holder or a non-spouse as a beneficiary.
- You can contribute up to $8,000 annually and there’s a lifetime contribution limit of $40,000
- Unused annual contribution room can be carried forward to the next year up to $8,000 ($16,000 total in any given year)
- In addition, you can deduct your FHSA contributions from your income tax just like in an RRSP (tax free means your money will grow faster!)
- The FHSA can hold the same qualified investments that are available for a TFSA that you can purchase with your contributions. This means you can hold investments such as GICs, mutual funds, ETFs and more in your FHSA account
- Under an FHSA, you can make a qualifying withdrawal of any amount used towards the purchase of a home and any gains that you have accumulated in your FHSA can be withdrawn tax-free towards the purchase of your first home.
- If you decide to withdraw funds for any reason other than purchasing your first home, this would be considered a non-qualifying withdrawal, subject to withholding tax, and would be treated as taxable income. Non-qualifying withdrawals will not reinstate your annual or lifetime contribution limit.
- What happens if you’ve decided that you’re no longer interested in buying a home? Well, instead of making a taxable withdrawal from your FHSA, any leftover funds not used in a home purchase can be transferred tax-free into an RRSP or RRIF.
- Funds transferred into an RRSP or RRIF would be subject to the normal rules and limitations of those account types.
- Funds can also be transferred from your RRSP to your FHSA but such transfers are not tax deductible and do not reinstate your RRSP contribution room.
- Transfers into your FHSA from your RRSP are subject to your FHSA annual and lifetime contribution limits.
Frequently Asked Questions
To open a First Home Savings Account (FHSA) once it’s available, you must be:
- At least 18 years of age and no less than the age of majority in the province where you live
- A Canadian resident
- A first-time homebuyer (meaning, you and/or your spouse or common-law partner have not owned a home where you lived in the calendar year in which you open the account or at any time in the preceding four calendar years)
Once the First Home Savings Account (FHSA) is available, initial product offerings will include:
- Savings deposits
- Exchange-Traded Funds (ETFs)
Yes, you will be able to carry forward any unused FHSA contribution room from the prior years up to a maximum of $8,000 (subject to your lifetime contribution limit of $40,000). This means that if you contribute less than $8,000 in a given year, you can contribute the unused amount in a subsequent year in addition to the $8,000 annual contribution limit for as long as you have the account.
No, once available, the FHSA will be an individual account and cannot be held jointly. However, you and your spouse could each have an FHSA and can combine your savings to buy a qualifying home.
Plus, the attribution rules will not apply to amounts that you receive from your spouse or common-law partner that you contribute to your FHSA—and vice versa. This means that any investment earnings in your FHSA will not be added to your or your spouse’s taxable income regardless of whether you or your spouse fund the contribution, as long as they are used to purchase a qualifying home.