The FHSA is a type of registered savings plan introduced by the federal government in 2022. An FHSA is designed to help you save for your first home. An FHSA combines some of the features of an RRSP and TFSA. Contributions will generally be tax-deductible, and when a qualifying withdrawal is made, the amount withdrawn is not-taxable. You can open an FHSA starting April 1, 2023.
A qualifying home is generally a housing unit located in Canada.
You can open an FHSA through an FHSA issuer such as a bank, credit union, or a trust or insurance company.
Since April 1, 2023, you can contribute up to $8,000 in any given year up to a lifetime contribution limit of $40,000. The annual contribution limit applies to the calendar year and you can carry forward up to $8,000 of your unused annual contribution amount to use in a later year (subject to the lifetime contribution limit). Excess contributions are subject to penalties similar to those imposed on overcontributions to a Registered Retirement Savings Plan (“RRSP”).Contributions can be made from outside your RRSP or as a direct transfer from your RRSP into your FHSA.
The contributions that you make to your FHSA may be deductible on your income tax and benefit return for the year of the contribution or a future year, similar to RRSP contributions (unlike RRSPs, contributions that you make to your FHSA during the first 60 days of the year are not deductible on your previous year’s income tax and benefit return). More specifically, contributions made from outside your RRSP are generally tax-deductible, while direct transfers from your RRSP to your FHSA are not tax-deductible. However, both types of contributions reduce your annual and lifetime contributions limits.
A qualifying withdrawal is an amount received out of your FHSA where all of the following conditions are met:
A qualifying withdrawal (defined directly above), as well as certain other limited withdrawals and certain limited transfers to an RRSP or Registered Retirement Income Fund (“RRIF”), do not have to be included in your income for tax purposes. In all other cases, withdrawals must be included in your income for income tax purposes.
For further details, please contact your Crowe BGK advisor.