First Home Savings Account
The first home savings account is a type of registered account that was designed to help individuals save for their first home purchase. If you are a resident of Canada with a valid SIN, are the age of majority in your province, and are considered a first-time home buyer, you may be eligible to open a FHSA. You are considered a first-time home buyer if you and/or your spouse or common-law partner have not owned a home where you lived this year or in the preceding four calendar years.
The numbers you need to know:
$8,000 – annual tax-deductible FHSA contribution limit
$40,000 – lifetime FHSA contribution limit
15 years – the FHSA has a 15-year lifespan. After that time, the funds must be transferred to an RRSP or RRIF
$0 – the tax you pay on any qualifying withdrawals from the account.
First Time Home Buyers Plan vs. First Home Savings Account
| First-time Home Buyers Plan | First Home Savings Account | |
|---|---|---|
| Tax-Deductible Contributions | Yes | Yes |
| Tax Deferred Growth | Yes | Yes |
| Tax Free Withdrawal for Home Buyer’s Purchase | Yes, if you follow the repayment plan | Yes |
| Limit for First-Time Home Buyer Withdrawal | $60,000 | None |
| Need to repay withdrawal | Yes, over 17 years | No |
| Minimum holding period for funds | 90 days | None |
| Annual Contributions | 18% of earned income up to a maximum | $8,000 |
| Contribution Deadline for Calendar year deduction | First 60 days of following calendar year | Dec 31st of the calendar year |
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Yes, you may use both your RRSP Home Buyers’ Plan (HBP) and the FHSA to purchase the same qualifying home.
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You can continue using your FHSA as normal with the one exception, you cannot make a qualifying withdrawal to buy or build qualifying home as long as you are a non-resident of Canada. Any withdrawal made during that time will be taxable and subject to withholding tax.
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You can hold the same investments in your FHSA that you can hold in your RRSP or TFSA. These include, publicly traded securities, mutual funds, ETFs, bonds, GICs, and savings accounts.
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The penalty is 1% per month on the highest excess FHSA amount that month. You will continue to pay the 1% tax until the excess amount is reduced or eliminated by your new FHSA participation room received in the following year or by removing the additional amounts from the account.
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You can transfer the funds to your RRSP or RRIF without affecting your contribution room. If you decide to withdrawal the funds instead, the amount will be included in your income for the year, and you will be responsible to pay any necessary tax
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For RRSPs, you can carry forward any unused contribution room indefinitely. However, with the FHSA, you can only carry forward up to a maximum of $8,000 in unused contribution room from the previous calendar year.
We suggest that even if you are thinking about opening an account to try to do it prior to December 31st so that you can earn the $8,000 contribution room for 2024 and in January an additional $8,000 for 2025.
This information contains the current opinions of the Author and such opinions and the facts on which they are based are subject to change over time without notice. This material is distributed for informational purposes only and is not intended to provide personalized legal, accounting, tax or specific investment advice. Please speak to a Westmount Wealth Advisor regarding your unique situation.
This information has been prepared by Lisa Carter, CFP®, CLU®, CIM® who is a Wealth Advisor and Financial Planner for Westmount Wealth Management Inc. and an Insurance Advisor for Westmount Wealth Planning Inc. Westmount Wealth Management Inc. is registered as a Portfolio Manager in British Columbia, Alberta, and Ontario, Canada. Westmount Wealth Planning Inc. is a subsidiary of Westmount Wealth Management Inc.
