First Home Savings Account - Is it right for you?
What is an FHSA?
The First Home Savings Account (FHSA) is a registered plan designed to help prospective first-time home buyers save for their first home in a tax-free manner (up to specific limits). Starting from April 1, 2023, you can open an FHSA if you are a qualifying individual.
Who can open an FHSA?
You are a qualifying individual if you meet all of the following requirements at the time the account is opened:
18 or 19 years of age or older (the age of majority per province)
a resident of Canada
a “first-time home buyer” i.e., you and your current spouse or common-law partner must not have owned a home that you lived in as your principal place of residence, at any point during the portion of the calendar year before the account was opened and in the 4 preceding calendar years.
How much you can contribute or transfer?
Your FHSA participation room for the year is the maximum amount that you can contribute to your FHSAs or transfer from your registered retirement savings plans (RRSPs) to your FHSAs in the year without creating an excess FHSA amount.
Your FHSA participation room in the year that you open your first FHSA = $8,000
The lifetime FHSA limit = $40,000
For example: if you contributed only $5,000 in one year, you’d be entitled to carry forward your remaining $3,000 contribution ($8,000 – $5,000 = $3,000) to the next year, in addition to your new annual entitlement of $8,000. This means you’ll be entitled to a total tax-deductible contribution of $11,000 ($8,000 + $3,000 = $11,000) in the following year.
How long do I have to buy my first property with the FHSA?
You’re allowed to hold an FHSA for 15 years or until age 71. This means that you have until December 31 of the year in which you either reach the 15th anniversary of your account opening or turn 70 to use your FHSA to purchase your first property.
Your FHSA must be closed by December 31 of the year following the date of your first qualifying withdrawal.
FHSA vs HBP: What are the main differences?
What is the difference between a FHSA and a HBP? And which one should you choose? It depends on your savings goals, as well as your financial and tax situation.
Which institutions provide FHSA accounts?
Although many financial institutions are expected to introduce FHSA accounts throughout the year, although we’ve noticed that RBC and National Bank currently offer them.