First Home Savings Account (FHSA) Now Live!

November 21^st 2023

In our last edition, Death & Taxes, we discussed the power of registered accounts in minimizing the “Investor Misery Index” (aka inflation + taxes). Earlier this year the Federal Government announced a new registered account to help investors looking to tax-shelter their investments while saving for their first home.

Who should contact us about opening an FHSA?

The FHSA contribution window is based on calendar year. As we’re already in late November, we’d ask only those meeting the below criteria to get in touch with us ASAP about opening one in 2023.

For all others interested, we will be sure to bring this up in your next review in 2024.

You are a resident of Canada.
You are between 18-71 years old.
You or your spouse (if applicable) are first time homebuyers.
You are planning on buying a home in the next 1-3 years.
You can contribute the maximum $8,000 by December 20^th and plan to contribute $8,000 in 2024 (or run a $667 monthly PAC).

How much can I contribute to an FHSA?

Annual Contribution Room: $8,000
Lifetime Contribution Room: $40,000 (Note: You can only carry forward $8,000 of contribution room.)

FHSA vs. RRSP Home Buyers Plan (HBP)

Please note than FHSA withdrawals can be used together with the HBP.

FHSA

The tax-free first home savings account is used to save to buy a first home.

Doesn't need to be paid back
No withdrawal limit
Annual contribution limit is $8,000.00 and lifetime contribution limit is $40,000.00
No minimum period before contributions are deductible, and can be withdrawn
The FHSA contribution deadline is December 31 each year

HBP

The homebuyers' plan (HBP) is a program that lets you withdraw funds from your RRSP to buy or build a first home.

Repayment required
Withdrawal limit of $35,000.00
Maximum annual RRSP contribution i.e 18% of your earned income in the previous year or the annual contribution limit for the current year
The money must be deposited in your RRSP 90 days before it can be withdrawn and placed in the HBP
The RRSP contribution deadline is 60 calendar days after the end of the year

Important Caveats

Currently we are unable to name a beneficiary on FHSAs.
For those without a will, this is yet another reminder to get something in place.
See Death & Taxes for why a will is so important.
You can create a legally valid will online in ~20 mins for as cheap as $113.00 with Willful.

You’re allowed to hold an FHSA for 15 years or until age 71.
This means that you have until December 31 of the year in which you either reach the 15^th anniversary of your account opening or turn 70 to use your FHSA to purchase your first property.

Your FHSA must be closed by December 31 of the year following the date of your first qualifying withdrawal.

If you still have money in your FHSA at the time of closing, several options are open to you:
Make a tax-free direct transfer to an RRSP or RRIF without affecting your RRSP contribution room.
Withdraw the money, which is subject to tax withholding, and deposit it into a daily chequing account. You could also reinvest it in a TFSA, for example.

Just the facts