Contributions

You will be able to contribute up to a lifetime limit of $40,000 to your FHSA, with an annual contribution limit of $8,000. The full annual limit of $8,000 would be available starting in 2023, no matter when you open the account during the year. You are able to hold more than one FHSA, but the total amount you can contribute to all of your FHSAs cannot exceed your annual and lifetime contribution limits. To help determine your contribution room, the Canada Revenue Agency (CRA) intends to provide basic information that will state how much you can contribute to your FHSA each year. You will be able to claim a deduction for contributions you made to a FHSA during a calendar year. However, contributions you make to a FHSA following a qualifying withdrawal (i.e., when buying a first home) will not be deductible. A FHSA contribution can be claimed as a deduction against all sources of taxable income. This deduction reduces your amount of taxable income for the year and therefore your taxes payable. The actual tax savings will depend on your marginal tax rate. 

Withdrawals 

There are qualifying withdrawals (non-taxable) as well as non-qualifying withdrawals (taxable).

When any withdrawals are made, you will receive an information slip from your financial institution stating the amount of the withdrawal and, for non-qualifying withdrawals, the amount of income tax withheld.

 In order for a FHSA withdrawal to be a qualifying withdrawal (i.e., non-taxable), the following conditions must be met:

  • You must be a first-time home buyer at the time you make a withdrawal. Specifically, you could not have owned a home in which you lived at any time during the calendar year before the withdrawal is made or at any time in the preceding four calendar years. If you make a withdrawal within 30 days of acquiring your home, it will still be considered a qualifying withdrawal
  • You must 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 your principal residence within one year after buying or building it. A qualifying home is a housing unit located in Canada. If a FHSA withdrawal is qualifying, you may withdraw the entire amount of available FHSA funds on a tax-free basis either as a single withdrawal or a series of withdrawals. No taxes will be withheld on qualifying withdrawals.

 If you make a withdrawal that’s not qualifying, the withdrawal will be included in your income. Taxes will be withheld on non-qualifying withdrawals, in a manner consistent with taxable RRSP withdrawals. Non-qualifying withdrawals will not re-instate either your annual or lifetime contribution limit.