The First Home Savings Account (FHSA) is a registered savings plan designed to assist individuals in accumulating funds for the purchase of their first home. By offering tax-free savings, the FHSA aims to expedite the journey of Canadians toward achieving homeownership.
To open an FHSA, you need to meet all of the following requirements at the time the account is opened:
Be of the age of majority (18 or 19 years of age depending on your province of residence)
Not be more than 71 years of age on December 31 of the year
Be a resident of Canada
Meet the first-time home buyer definition
For the purpose of opening an FHSA, you will be considered to be a first-time home buyer if you did not, at any time in the current calendar year before the account is opened or at any time in the preceding four calendar years, live in a qualifying home as your principal place of residence that you or your spouse owned or jointly owned.
You can contribute up to a lifetime limit of $40,000 to an FHSA. The annual contribution limit is $8,000.
You can carry forward a maximum of $8,000 of unused contribution room to a later year.
Transferring from a TFSA or an RRSP to an FHSA
You can transfer funds from your RRSPs to your FHSAs without any immediate tax consequences, as long as it is a direct transfer and does not exceed your unused FHSA participation room at the time of the transfer.
Direct transfers between a TFSA and an FHSA are not supported. However, you can indirectly transfer funds from your TFSA to your FHSA by withdrawing funds from your TFSA to your bank account or a non-registered account at ModernAdvisor, and then contribute the funds to your FHSA from there. Please note that if you withdraw funds from a TFSA, you will not regain the contribution room until January 1st of the following year.
Withdrawing from an FHSA
If you meet the criteria for a qualifying withdrawal, you can make unlimited withdrawals from your FHSA without incurring any taxes. Be aware, however, that specific regulations come into effect following your initial qualifying withdrawal. To acquire additional information, please see the "Closing your FHSA" section or consult the FHSA withdrawals page on the Government of Canada's website.
Non-qualifying withdrawals from an FHSA must be included as income on your income tax and benefit return for the year the withdrawal is received. This amount will be subject to income tax withholding, which can be claimed on your income tax and benefit return as a credit towards any tax owing for the year of the withdrawal.
Designating a Beneficiary on an FHSA
As of Nov 1, 2023, not all provinces have amended their succession legislation to accommodate beneficiary designations on FHSAs. Until the legislation is amended by all provinces, beneficiary designation on ModernAdvisor FHSAs is not supported.
Closing an FHSA
You should close all of your FHSAs on or before December 31 of the year following the year of your first qualifying withdrawal. This is because your maximum participation period ends at the end of the year following the year of your first qualifying withdrawal.