First Home Savings Account (FHSA)첫 집 저축 계좌

What is it?

An FHSA is a registered account (a government-registered account with tax benefits) for saving toward your first home. Banks, credit unions and insurers have offered it since April 2023.

It combines the best parts of an RRSP (retirement savings) and a TFSA (tax-free savings). Money you put in is deducted from your income like an RRSP, so you pay less income tax. Money you take out to buy your first home is tax-free, like a TFSA. Interest and investment growth inside the account are not taxed either.

Who can open one?

At the moment you open the account you must meet all three tests (Income Tax Act, s. 146.6(1), "qualifying individual").

• You are a resident of Canada for tax purposes.
• You are at least 18 years old.
• In this calendar year and the four calendar years before it, you have not lived, as your principal residence, in a home owned by you or by your current spouse or common-law partner. Homes outside Canada count. For example, if you lived in an apartment you owned in Korea and moved here last year, you cannot open one yet.

The "first home" test is not "have you ever owned a home". It is "have you lived in your own (or your spouse’s) home in the last four years". This is different from the Ontario land transfer tax refund, which is once in a lifetime.

How much can you put in?

If you put in more than your limit, you may have to pay a separate penalty tax on the extra amount (the "excess FHSA amount" in s. 207.01 of the Income Tax Act). Check the amount and how to fix it with the CRA (Canada Revenue Agency). Check your room for this year with your bank and in your CRA My Account.

How is it taxed?

• Money you put in: deducted from your income for that year (s. 146.6(5)). You do not have to use the deduction right away. In a low-income year you can save it and deduct it in a higher-income year.
• Growth inside the account: interest, dividends and investment gains are not taxed (s. 146.6(3)).
• Money you take out to buy a home (a "qualifying withdrawal"): not taxed and not added to your income (s. 146.6(6)(a)).
• Money you take out for any other reason: added to your income for that year and taxed.
• Transfers to an RRSP or RRIF: tax-free (s. 146.6(7) and (8)). If you never buy a home, you do not lose the money.

Taking the money out to buy a home

To withdraw tax-free (a "qualifying withdrawal") you must meet all of the conditions below. You apply to your bank on the prescribed form.

1. First sign a written agreement to buy or build the home. You cannot withdraw before you have a contract.
2. You must intend to live in the home as your principal residence within one year of getting it. You write the address of the home on the form.
3. You must get the home (take ownership) before October 1 of the following year.
4. You cannot use it for a home you already bought more than 30 days before the withdrawal. Withdraw before closing, or within 30 days after.
5. You must be a resident of Canada from the withdrawal until you get the home. You also must not have lived in a home you owned, as your principal residence, from January 1 of the fourth year before the withdrawal up to 31 days before the withdrawal.

If you meet the conditions, you can take out everything in the account, including growth, tax-free, in one withdrawal or several. The law sets no dollar cap on the withdrawal.

How long can you keep it?

An FHSA is not meant to last forever. The law sets a "maximum participation period". The account ends at the end of the year after the year in which the earliest of these three events happens (s. 146.6(1), "maximum participation period").

• The 14th anniversary of the day you first opened an FHSA, so the account ends at the end of the following year. For example, if you opened it in May 2024, the 14th anniversary is May 2038 and the account ends on December 31, 2039.
• You turn 70, so the account can run until the end of the year you turn 71.
• You make your first qualifying withdrawal to buy a home, so the account must close by the end of the following year.

When the period ends, move any money left to an RRSP or RRIF tax-free, or withdraw it and pay tax. If you do nothing, the account stops being an FHSA and the whole balance is counted as your income that year (s. 146.6(16) and (17)).

Can you use it together with the HBP (RRSP withdrawal)?

In the text of s. 146.6 that I read, nothing stops you from using an FHSA withdrawal and the Home Buyers’ Plan (HBP, a withdrawal from your RRSP) for the same home. The "first home" test in both programs (no owner-occupied home in the last four years) is almost the same. Please confirm with the CRA’s guidance whether both can be used together, in what order and on which forms.

The difference is repayment. Money taken out under the HBP must be paid back into your RRSP over 15 years. Money taken out of an FHSA never has to be paid back.

You can also move money from an RRSP into an FHSA. The transfer uses up your FHSA room ($8,000 a year, $40,000 lifetime).

Example

This is an illustration only. Investment growth is not guaranteed, and the tax you get back from the deduction depends on your income.