How does an FHSA work?

FÉRIQUE Investment Services

An FHSA allows prospective qualifying first-time home buyers to save up to $40,000 tax-free.

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$8,000

Annual contribution limit
$40,000

Lifetime contribution limit
15 years

Lifespan of an FHSA

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With Béatrice and Bryan, from FÉRIQUE Investment Services

Eligibility

An individual and a resident of Canada
Between the ages of 18 and 71
A “first-time home buyer”: you (or your partner) did not own your principal place of residence in the year before the account was opened or at any time in the preceding four years.

Contributions

$8,000
Annual contribution limit

$40,000
Lifetime contribution limit

The annual contribution limit will apply to contributions made during a calendar year (January 1 to December 31).

Carry forward

The unused contribution room can be carried forward, up to a maximum of $8,000.

For example, a person contributing $4,000 to an FHSA in 2023 will be allowed to contribute $12,000 in 2024.

Tax deductions for FHSA contributions

Contributions made to an FHSA will be tax deductible and reduce taxable income for the current year.

Deductions do not have to be claimed in the year the contribution was made. They could be carried forward indefinitely and claimed in a later tax year.

Withdrawals

Amounts withdrawn from an FHSA will be tax-free if used to purchase a qualifying home. In all other cases, amounts withdrawn from an FHSA will be taxable.

Withdrawals are not capped. The only limit to how much one can withdraw is the amount accrued in the account, based on investment returns.

Unlike the HBP, withdrawals from an FHSA don’t have to be repaid.

Closing an FHSA

All FHSAs must be closed by December 31 of the year following the first qualifying withdrawal.

If money in the FHSA is not used to purchase an eligible first home, the account will cease to be an FHSA after December 31 of the year that the earliest of the following events occurs:

the 15th anniversary of opening the first FHSA;
the account holder turns 71 years of age.

The sums may:

Transferred on a tax-deferred basis to a registered retirement savings fund (RRSP) or registered retirement income fund (RRIF) depending on the person’s age without affecting their RRSP contribution room, OR
Withdrawn and taxed.

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