FHSA: Tax Free First Home Savings Plan
Coming 2023
Many of our clients have children who are hoping to buy their first home in the next few years. The federal government has set up a new savings account which will help. In April the Tax Free First Home Savings account (FHSA) was announced, which will be a new registered account to help individuals save to purchase a new home.
To be able to open a FHSA:
- You must be 18 years of age or older and a resident of Canada
- Cannot have lived in a home you have owned the year you open the account or during the previous four calendar years
- Like a RRSP contributions to the FHSA are tax-deductible
- You can only participate once in your lifetime to purchase a single property
- Once a nontaxable withdrawal is made towards to the purchase of a new home the FHSA must be closed within one year from the first withdrawal
- There is an annual contribution limit of $8,000 with a lifetime contribution limit of $40,000
- The unused annual contribution cannot be carried forward like the TFSA
- You may hold more than one FHSA, but the contribution limits are the same above no matter how many you hold
- You may transfer the funds from the FHSA to a RRSP on a tax deferred basis meaning you will pay tax when you begin withdrawing from your RRSP.
- Once you open a FHSA you must use the funds within 15 years to purchase a new home or transfer the funds to a RRSP or RRIF, or withdrawn and taxed
- You are allowed to transfer from an existing RRSP subject to the limits above. Note: the transfer from the RRSP does not restore the contribution room with respect to the amount transferred. Note: This is because you already received the tax benefit when you added to your RRSP previously
- The Home Buyer’s Plan Allows which allows up to $35,000 to be withdrawn from an RRSP (and must be repaid within 15 years) for a purchase of a home will remain in effect.
More information will be coming and expect some changes to the above as they work through the rules.
Source: https://www.moneysense.ca/spend/real-estate/first-home-savings-account/
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