FHSA

Laura Chanin • August 17, 2022

FHSA: Tax Free First Home Savings Plan

Coming 2023

Many of our clients have children who are hoping to buy their first home in the next few years. The federal government has set up a new savings account which will help. In April the Tax Free First Home Savings account (FHSA) was announced, which will be a new registered account to help individuals save to purchase a new home.

To be able to open a FHSA:

You must be 18 years of age or older and a resident of Canada
Cannot have lived in a home you have owned the year you open the account or during the previous four calendar years
Like a RRSP contributions to the FHSA are tax-deductible
You can only participate once in your lifetime to purchase a single property
Once a nontaxable withdrawal is made towards to the purchase of a new home the FHSA must be closed within one year from the first withdrawal
There is an annual contribution limit of $8,000 with a lifetime contribution limit of $40,000
The unused annual contribution cannot be carried forward like the TFSA
You may hold more than one FHSA, but the contribution limits are the same above no matter how many you hold
You may transfer the funds from the FHSA to a RRSP on a tax deferred basis meaning you will pay tax when you begin withdrawing from your RRSP.
Once you open a FHSA you must use the funds within 15 years to purchase a new home or transfer the funds to a RRSP or RRIF, or withdrawn and taxed
You are allowed to transfer from an existing RRSP subject to the limits above. Note: the transfer from the RRSP does not restore the contribution room with respect to the amount transferred. Note: This is because you already received the tax benefit when you added to your RRSP previously
The Home Buyer’s Plan Allows which allows up to $35,000 to be withdrawn from an RRSP (and must be repaid within 15 years) for a purchase of a home will remain in effect.