First Home Savings Account (FHSA) was introduced in the 2022 Federal budget to help first-time homebuyers save towards their home purchase. FHSA can be considered as a combination of benefits from both RRSP and TFSA. FHSA Contributions are tax-deductible like an RRSP and Qualifying withdrawals are tax-free like a TFSA.

• Annual contribution limit of $8,000 with a lifetime limit of $40,000.
• Maximum carryover of $8,000 from previous years ($16,000 maximum contribution in a single calendar year)
• Contributions are tax-deductible, same like RRSP.
• Contributions do not affect RRSP contribution room.
• All investment gains are tax free like any Tax-sheltered accounts
• Qualifying withdrawals are tax free.
• More tax efficient than the Home Buyers’ Plan.
• Unused contribution room can be carried over to subsequent years.
• In the event a client does not use investment to purchase a home, proceeds can be moved on a tax-sheltered basis to a RSP or RIF.

• Canadian residents including Citizens, PR, Work Permit, Study Permit (With valid SIN)
• Minimum of 18 years of age
• First-time homebuyers OR Has not owned a home in which they lived during the current or preceding four calendar years.
• New Canadians without a SIN: FHSA can be set up with a Temporary Tax Number.

According to CRA, the FHSA participation period begins when the account is open and not when the first deposit goes into the account. FHSA remains open until one of the following happens:

• If the client withdraws to purchase a qualifying home (No Tax Withheld)
• Tax withheld if the client withdraws from FHSA directly into cash.
• December 31st of the year in which the FHSA holder reaches the 15th anniversary of participation in the program.
• December 31st of the year in which the FHSA holder turns 71.

Unlike a TFSA, contribution room does not accumulate if a FHSA has not yet been opened. If a client opens a FHSA in 2024, they do not receive contribution room for the missed year of 2023.

FHSA carryforward amount cannot exceed $8,000. This means that a client cannot contribute more than $16,000 in the same calendar year. The maximum in year three is $16,000. This is the maximum unused contribution room.

Unlike a TFSA, if a client withdraws money from a FHSA unrelated to a home purchase, the client does not have the contribution room reinstated the following year. Once a client opens a FHSA, the FHSA contribution room will appear on the Notice of Assessment.

Like a TFSA, there is a 1% charge on the excess contribution amount for each month (or part of a month). The client would normally cease to be in an excess contribution situation by January 1st of the following year.

FHSA proceeds can be transferred to another FHSA, a RSP or a Retirement Income Fund. A client who no longer plans to use FHSA to purchase a home can move the proceeds on a tax-sheltered basis to a retirement savings account.

Similarly, RSP proceeds can be transferred to a FHSA using the RC720 form.
New contributions are tax deductible (receipt issued).
RSP transfers into the FHSA are done on a tax-sheltered basis and are not tax deductible (no receipt issued).

To be deductible in a given calendar year, the contribution must be made in that calendar year, by December 31st. For tax purposes, FHSA contributions can be carried forward and deducted in a later tax year. Unlike RSPs, spousal contributions are not available with the FHSA. However, a client can give proceeds to a spouse to contribute to the spouse’s own FHSA.

If a client transfers a spousal RSP proceeds to a FHSA, the attribution rule is applicable. Any amount transferred to a FHSA that had been contributed to the spousal RSP in that year or the previous two years would be taxed as income to the spousal RSP contributor AND would be deemed a new contribution to the FHSA and would be tax-deductible to the FHSA accountholder.

Third-party contributions to a FHSA are not permitted. Clients can give money to their spouses or adult children that they, in turn, can contribute to their own FHSA.

Opening multiple accounts does not change the maximum FHSA contribution room available.
The FHSA participation period is based on the date when the first FHSA is opened.

Must be a first-time homebuyer: Defined as someone who has not owned a home in which they lived in the year of withdrawal or the previous four calendar years. Must have a written agreement to buy or build a qualifying home before October 1 of the year following the year of withdrawal. Must intend to occupy the home as the principal place of residence within one year of buying or building it.

A withdrawal for anything but a qualifying first home purchase is deemed a non-qualifying withdrawal. Withholding tax applies on the non-qualifying withdrawal and Contribution room is not reinstated for the any amounts withdrawn.

Completion of Part A of the form RC725 will determine if the FHSA holder qualifies to make a withdrawal under the program. This form is not required if a client is doing a non-qualifying taxable withdrawal from the FHSA.

Like a TFSA, the account holder can designate a successor annuitant on a FHSA. The successor annuitant must be the spouse or common-law partner of the account holder. In the event of death of the account holder, the surviving spouse would become the owner of the FHSA. • This would not affect the surviving spouse’s FHSA contribution room. A spouse who is designated as the beneficiary does not have the option of choosing to be the successor annuitant instead. The FHSA participation period is based on the date when the first FHSA is opened.

If the beneficiary of the FHSA is not a spouse or common-law partner, the FHSA cannot be transferred to the beneficiary’s own FHSA upon the death of the account holder. Proceeds must be paid out to the beneficiary. Unlike other registered products, the amount paid to the beneficiary would be included in the beneficiary’s income for tax purposes. Tax is normally withheld on the payment to the beneficiary.

An amount could be transferred from the FHSA of one spouse to the FHSA, RSP or RIF of the other spouse. This would not affect the FHSA contribution room of the recipient. This also would not reinstate contribution room for the transferring spouse.