A first home saving account (FHSA) is a registered plan allowing you to save for your first home tax-free.
Criteria to qualify for the FHSA
- You must be a first-time home buyer. Which is defined as an individual is considered to be a first-time home buyer if at any time in the part of the calendar year before the account is opened or at any time in the preceding four years they did not live in a qualifying home (or what would be a qualifying home if located in Canada) that either (i) they owned or (ii) their spouse or common-law partner owned (if they have a spouse or common-law partner at the time the account is opened).
- A resident of Canada
- 18 years of age
Summary Features of an FHSA
Contributions and deductions:
- Individuals would be able to claim an income tax deduction for contributions made in a particular taxation year
- Annual contributions are capped at $8,000, up to a $40,000 during the lifetime contribution limit
- Unused contribution room can carry forward to the following year up to a maximum of $8,000
FHSA parameters:
The account can stay open for 15 years or until the end of the year you turn 71, or at the end of the year following the year in which you made a qualifying withdrawal from an FHSA for the first home purchase, whichever comes first.
What if you don’t purchase a home?
- Any savings not used to purchase a qualifying home could be transferred to an RRSP or RRIF (Registered Retirement Income Fund) on a non-taxable transfer basis, subject to applicable rules.
- The funds transferred to an RRSP or RRIF will be taxed upon ultimate withdrawal, if not transferred but instead withdrawn, FHSA funds would be subject to taxes.
What is a qualifying withdrawal?
- Must be a first-time home buyer and a resident of Canada at the time of the withdrawal to the acquisition of the qualifying home.
- You must have a written agreement to buy or build a qualifying home located in Canada before October 1 of the year following the year of withdrawal, and
- You must also intend to occupy the qualifying home as your principal place of residence within one year buying or building it.