First Home Savings Account (FHSA)
Tuesday Apr 11th, 2023
What is a First Home Savings Account (FHSA)?
A First Home Savings Account (FHSA) is a registered plan allowing you, as a prospective first-time home buyer, to save for your first home tax-free (up to certain limits).
The account has a $40,000 lifetime contribution limit and grows tax free. After 15-years the account can then be rolled into the RRSP without affecting RRSP contribution room. Effectively it gives anyone who qualifies for the FHSA an extra $40,000 to contribute to their RRSP.
When can you start contributing?
You will be able to open an FHSA starting April 1, 2023.
Who qualifies to open a FHSA?
You must be:
✔️18 years old
**in certain provinces and territories the age at which you can enter into a contract is 19 years old. This will apply to the FHSA.
✔️a resident of Canada
✔️a first time home buyer
How do I open a FHSA?
You have to go through an official FHSA issuer (bank, credit union, trust, or insurance company). They will advise you on the different types of FHSAs and what are qualified investments.
You will need to bring:
-your social insurance number
-your date of birth
-any supporting documents your issuer may need to certify that you are a qualifying individual
Note: you can have more than one FHSA at any given time and you can transfer funds from existing RRSPs. In order to avoid unintended tax consequences make sure that you understand what your FSHA participation room is for the year.
When you open a FSHA you can designate a beneficiary.
There are three types of FHSAs that can be offered
1. A depositary FHSA is an account (with a financial institution) that holds money, term deposits, or guaranteed investment certificates (GICs)
2. A trusteed FHSA is a trust (with a trust company as trustee) that holds qualified investments such as money, term deposits, GICs, government and corporate bonds, mutual funds, and securities listed on a designated stock exchange
3. An insured FHSA an annuity contract (with a licensed annuity provider)
If you want to build and manage your own portfolio you also have the option of setting up a self-directed FHSA. For more details you would need to contact the FSHA issuer.
Closing a FSHA
The maximum participation period is on December 31st of the earliest of the following events:
-The 15th anniversary of the opening of your first FSHA or
-The year you turn 71 years old or
-The year following your first qualified withdrawal
**you should close your FSHA before your maximum participation period ends.
It is important to note that if you contribute or transfer more than your FSHA participation room for the year, you may end up having to pay taxes.
This information should not be relied on as legal advice, financial advice, or a definitive statement of the law in any jurisdiction. For such advice, please consult your own legal counsel, financial representative, and/or insurance representative.