To open a FHSA, an individual must be:

• a resident of Canada;
• at least 18 years of age; and
• a first-time home buyer, meaning they have not owned a home in which they lived at any time during the part of the calendar year before the account is opened or at any time in the preceding four calendar years. For this purpose, ownership is defined broadly and includes beneficial ownership, but excludes a right to acquire less than 10% of a qualifying home.

An individual can open a FHSA through eligible issuers which include:

• Canadian trust companies,
• life insurance companies,
• banks, and
• credit unions.

The annual contribution will be reported on an individual’s personal tax return in the same tax year as the contribution was made. The individual is then eligible for a tax deduction in a similar way as a RRSP deduction. An individual is allowed to determine the tax year they wish to deduct the contribution , also similar to a RRSP. This allows an individual to carry-forward unused FHSA annual contributions to future tax years.

Any unused annual contribution room will accumulate for individuals to future years. For example, if an individual contributed $4,000 to a FHSA in 2023, the individual would have a maximum contribution of $12,000 in 2024 (the remaining $4,000 unused in 2023 plus the annual $8,000 maximum). Each individual is responsible for ensuring they do not exceed their annual maximum contribution limits.

In order for a withdrawal from a FHSA to be non-taxable, it has to meet certain conditions.

1. A taxpayer must be a first-time home buyer at the time a withdrawal is made.
2. The individual must also have a written agreement to buy or build a qualifying home before October 1 of the year following the year of withdrawal and intend to occupy the qualifying home* as their principal place of residence within one year after buying or building it.

If any of the above conditions are not met, the withdrawal will be considered non-qualifying and will be included in the individual’s personal income in the same tax year as the withdrawal was made. Non-qualifying FHSA withdrawals will be taxed with the same treatment as taxable RRSP withdrawals.

An FHSA is permitted to hold the same qualified investments that are currently allowed to be held in a TFSA. In particular, individuals can invest in:

• mutual funds,
• publicly traded securities,
• exchange-traded funds (ETFs),
• government and corporate bonds, and
• guaranteed investment certificates (GICs).

Examples of prohibited investments inside a FHSA include:

• land and real estate,
• shares of private corporations, and
• general partnership units.

An FHSA of an individual would cease to be an FHSA, and the individual would not be permitted to open an FHSA, after December 31 of the year in which the earliest of these events occurs:

1. The fifteenth anniversary of the individual first opening an FHSA

OR

2.The individual turns 71 years old

Any savings not used to purchase a qualifying home can be transferred on a tax-free basis into an RRSP or Registered Retirement Income Fund (RRIF), otherwise the funds would have to be withdrawn on a taxable basis. Individuals who make a qualifying withdrawal could transfer any unwithdrawn savings on a tax-free basis to an RRSP or RRIF until December 31 of the year following the year of their first qualifying withdrawal.