Unlock FHSA Benefits: For First-Time Homebuyers in Canada 2024

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Great news for Canadian first-time homebuyers comes in the form of the newly introduced First Home Savings Account (FHSA). To be eligible, individuals must be Canadian residents aged between 18 and 72, and it is specifically designed for those purchasing their first home. Contributions to the FHSA are eligible for tax deductions, capped at an annual limit of $8,000, which includes the option of carrying forward unused amounts. The lifetime maximum contribution is set at $40,000, and any investment income generated within the account remains tax-free.

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For couples, both partners have the opportunity to have their own FHSA; however, contributions made to a spouse's account do not qualify for tax deductions. Each spouse is allowed to contribute up to $8,000 annually, enabling them to reach a combined maximum of $40,000 each over time.

Transfers from your RRSPs to your FHSAs

To execute a direct transfer from your RRSPs to your FHSAs, complete Form RC720, titled "Transfer from RRSP to FHSA," and submit it to your financial institution.

A direct transfer from RRSPs to FHSAs will decrease your unused FHSA participation room.

The transfer of assets from RRSPs to FHSAs will not reinstate your unused RRSP deduction room.

Allowable FHSA deduction

The sum of your annual FHSA limits for the current year and previous years, reduced by the total of your FHSA deductions from prior years,

$40,000, reduced by the total of your FHSA deductions from previous years and any amounts transferred from your registered retirement savings plans (RRSPs) to your FHSAs in the current year and previous years.

Qualifying withdrawal

When purchasing or constructing a qualifying home in collaboration with another individual, both parties have the opportunity to make a qualifying withdrawal from their respective FHSAs, provided that each person satisfies all the conditions necessary for a qualifying withdrawal.

A qualifying withdrawal from your FHSA occurs when you satisfy the following conditions:

To be eligible for a withdrawal, you must qualify as a first-time homebuyer. This implies that, in the current calendar year and the preceding four calendar years, you have not resided in a qualifying home (or a home that would be considered qualifying if situated in Canada) as your main residence, which you owned or co-owned, except for the 30 days immediately preceding the withdrawal.

you need a written agreement to purchase or construct a qualifying home, with the acquisition or completion date of the qualifying home set before October 1 of the year following the withdrawal date. What constitutes a qualifying home.
You should not have obtained the qualifying home earlier than 30 days before initiating the withdrawal.
You must not have acquired the qualifying home more than 30 days prior to commencing the withdrawal
To make a qualifying withdrawal from your FHSA, complete Form RC725, titled "Request to Make a Qualifying Withdrawal from your FHSA," and submit it to your FHSA issuer.