The First Home Savings Account (FHSA) is a registered savings plan designed to assist Canadians in saving for their first home. Eligible individuals aged between 18* and 71 who reside in Canada can open an FHSA to accumulate funds for their home purchase.
*In certain provinces and territories, the legal age at which an individual can enter into a contract (which includes an FHSA) is 19 years old.
Contribution Limits:
- Yearly Contribution Limit: $8,000
- Lifetime Contribution Limit: $40,000
Unused contribution room carries forward to the next year, but this accumulation begins only after the initial FHSA opening and does not automatically start at the age of 18.
FHSA Eligibility
This account is tailored specifically for first-time homebuyers. To qualify, individuals must not have owned a home or resided in one they owned in the four calendar years preceding the opening of the FHSA account.
Investments in FHSA
An FHSA can house savings or investments, including qualified investments allowed in a TFSA, such as mutual funds, bonds, and GICs.
Coexistence with Other Accounts
You can hold an FHSA simultaneously with a TFSA and/or RRSP. The RRSP Home Buyers' Plan (HBP) allows withdrawal of up to $35,000 from an RRSP for a first home purchase, with a repayment period of 15 years.
Tax Implications
Contributions to an FHSA are generally tax-deductible, allowing individuals to claim annual contributions on their tax return. However, if an individual transfers their FHSA into their RRSP, the transfer is not tax-deductible.
Comparing the FHSA, RRSP, and TFSA
What Happens If You Don't Buy a Home?
Unused FHSA contributions can be transferred tax-free to an RRSP or a Registered Retirement Income Fund (RRIF). However, withdrawals not used for a home purchase are considered taxable income.
Closure of FHSA
The FHSA must be closed either after 15 years or by the end of the year you turn 71, depending on whichever comes first.
The First Home Savings Account is a tool worth considering for aspiring young homeowners and parents looking to transfer financial assistance efficiently. With tax benefits and a dedicated platform for fund accumulation, it can help streamline the path to first-time homeownership. Discuss your long-term savings goals with your Wealth Advisor to determine whether the FHSA, RRSP Home Buyers' Plan, or TFSA aligns best with your unique financial needs.
This material is distributed for informational purposes only and is not intended to provide legal, accounting, tax, or specific investment advice. Please speak to your Nicola Wealth advisor regarding your unique situation.
