Announced in the 2022 federal budget, an FHSA is a new type of registered savings plan. It aims to help first-time home buyers save, thereby facilitating access to homeownership.

An FHSA, in a nutshell, allows you to:

• Deduct the contributions from your annual taxable income, as with a Registered Retirement Savings Plan (RRSP)
• Generate tax-free returns, as with a Tax-Free Savings Account (TFSA) and RRSP
• Use the funds you accumulate to buy a first home in Canada

Also, unlike withdrawals made from an RRSP under the Home Buyers’ Plan (HBP), funds withdrawn from an FHSA do not have to be paid back.

To qualify for an FHSA, you must:

• Be a resident of Canada and have a social insurance number
• Be at least 18 years of age or the age of majority in your province of residence
• Be 71 or younger as of December 31 of the year you open your FHSA
• Not have lived in a qualifying home in Canada that you and/or your spouse owned at any time in the calendar year that the account is opened or at any time in the preceding four calendar years

Yes. At the time of withdrawal to purchase a first home, the account holder must confirm that they still qualify for their FHSA. Please note that this only affects the FHSA account holder and that, once a proof of or agreement to purchase (i.e. an offer) has been submitted, they may withdraw the funds tax-free, even if their spouse is a homeowner.

The maximum contribution room for an FHSA is $8,000 per year, per eligible person. You can contribute a lifetime limit of $40,000 over a maximum of 15 years following the opening of your FHSA. Your contribution room accumulates annually as of the year of opening. You will therefore need at least five years to reach the limit of $40,000.

Once your FHSA is open, you can also carry forward any unused contribution room. However, the maximum unused amount you can contribute each year is limited to $8,000. Your maximum annual contribution could therefore increase to $16,000 in a year, that is, $8,000 of contribution room for the current year plus the maximum of $8,000 of unused contributions carried over from preceding years.

Unlike RRSPs, which allow contributions up to 60 days after the end of the fiscal year, the deadline to contribute to your FHSA is December 31 of each year.

FHSA deductions can be carried forward indefinitely, even after the account has been closed. It could therefore be advantageous to carry these deductions forward if you foresee your income increasing in the coming years. Do not hesitate to discuss this option with your advisor to find out if it is right for you.

You can contribute to your FHSA until December 31, 15 years after opening your account or until you turn 71 years of age.

After being used to purchase a property, your FHSA will remain open until December 31 of the year following your first qualifying withdrawal (as defined in the regulations). For example, if you withdraw part of your FHSA in 2032, it must be closed by the end of 2033 at the latest.

If you do not use your FHSA during the participation period, you can:

• Transfer your savings to a Registered Retirement Savings Plan (RRSP), regardless of the contribution room remaining in your RRSP
• Transfer your savings to a Registered Retirement Income Fund (RRIF)
• Withdraw the funds yourself: in this case, your contributions and the returns generated in your FHSA will be 100% taxable

No, withdrawals made from an FHSA in order to purchase a first qualifying home (as defined in the regulations) are not taxable. This includes, if applicable, the returns generated through an FHSA, which could allow you to increase your down payment.

Absolutely! Using your RRSP to take advantage of the Home Buyers’ Plan (HBP) remains beneficial.

Remember that the HBP allows you to use the funds in your RRSP to buy a first home. The withdrawal limit is $35,000. You then have 15 years to pay the funds you withdrew back to your RRSP.

Here are two examples of situations where an RRSP can fit into your homebuying strategy:

A TFSA is also an interesting savings vehicle for several reasons. Here are a few:

• Since an FHSA has a maximum contribution period of 15 years, which begins when your first FHSA is opened, it could be beneficial to start saving in a TFSA first. You could then transfer these savings and the returns they have generated to an FHSA, taking full advantage of your contribution room. Also, you can reuse your TFSA contribution room the following year.
• A TFSA offers greater flexibility when it comes to withdrawing your savings. Money invested in your TFSA can therefore be used to save for a down payment, but also for other important plans or to build a contingency fund.

If you live with your spouse in a qualifying home that he or she owns, you cannot open an FHSA.

If you do not live with your spouse and you meet all FHSA eligibility criteria, including not having lived in a qualifying home that you owned in the current year or in the past four years, you may open an FHSA.

Note: Whether or not you live with your spouse, if you opened an FHSA before your relationship with him or her began, you can keep contributing and use it to purchase your first property.