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First Home Savings Account (FHSA)

 

A First Home Savings Account (FHSA) is a registered savings plan allowing a first-time home buyer to save to purchase a qualifying first home tax free.  Your FHSA limit in the first year you open your FHSA is $8,000.  The limit increases each year by $8,000 and the unused amount will carry forward to a future year.  The lifetime contribution room maxes out at $40,000 which includes both contributions and transfer from another registered account (such as an RRSP).  Contributions to your FHSA are generally deductible and can be used to reduce your tax.  Any contributions not deducted on your tax return in the year of purchase can be carried forward to be claimed in a future year.  However, transfers from your RRSP to FHSA are not deductible.

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Qualifications to open an FHSA:

 

-  Age requirements: you must be the legal age or older in your province (18 years of age in Alberta) and 71 years of age or younger the year you open your FHSA.

-  You are a resident of Canada.

-  First-time home buyer requirements: you did not live in a qualifying home located in Canada that you (or your spouse or common-law partner if applicable) owned or jointly owned in this calendar year or the previous 4 calendar years.

 

If you meet all of the qualifying withdrawal conditions, you can withdraw all of the funds from your FHSA tax free.  Qualifying withdrawals are when all of the following conditions are met:

 

-  You are purchasing your first home and neither your or your spouse or common-law partner have owned or jointly owned a home in this calendar year or the previous 4 calendar years.

-  You have a written agreement to buy or build a qualifying home with the acquisition or construction completion date before October 1 of the year following the date of the withdrawal.

-  You did not acquire the qualifying home more than 30 days before making the withdrawal.

-  You meet the residency of Canada requirements from the first qualifying withdrawal until the earlier of the acquisition of the qualifying home or the date of your death.

-  You intend to reside in the qualifying home as your principal place of residence within one year of purchasing or building the home.

 

The FHSA is a great tool to help save for your first home.  The tax deduction in the year of purchase combined with not having to report the withdrawal as income when withdrawn under the qualifying withdrawal conditions is a huge benefit to many individuals.  ​
 

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Questions?  Call or email today!

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