FHSA EXPLAINED: Saving For Your First Home in Canada with the First Home Savings Account
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- Опубліковано 25 лип 2024
- The Tax-Free First Home Savings Account (FHSA) is a new account for Canadian first time homebuyers. In addition to the RRSP Home Buyers Plan (HBP), both accounts can provide at least $75,000 of tax free room (and $150,000 for couples) to save for a downpayment! This video gives an overview of everything you need to know about the FHSA to start saving for your first home.
𝗧𝗼𝗽𝗶𝗰𝘀 𝗖𝗼𝘃𝗲𝗿𝗲𝗱:
0:00 - Intro
1:04 - How does the FHSA work?
2:55 - Opening & Investing in the FHSA
5:01 - FHSA vs RRSP Home Buyers Plan (HBP)
6:07 - Closing the FHSA
6:32 - CLARIFICATION: FHSA funds transferred to RRSP doesn't use up the contribution limit. But if you don't transfer the funds over before Dec 31 of the year following your qualifying withdrawal then it would have to be withdrawn on a taxable basis.
𝗥𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀:
1. Government of Canada FHSA Backgrounder: www.canada.ca/en/department-f...
2. Bill C-32 Tax Update to FHSA: www.investmentexecutive.com/n...
If you’re an instructor who would like to access my slides, please reach out on:
Twitter: / stephanieyzhou
Instagram: / breakingbaddebt
#fhsa #firsthomebuyer #firsthome
6:32 - CLARIFICATION: FHSA funds transferred to RRSP doesn't use up the contribution limit. But if you don't transfer the funds over before Dec 31 of the year following your qualifying withdrawal then it would have to be withdrawn on a taxable basis.
𝗧𝗼𝗽𝗶𝗰𝘀 𝗖𝗼𝘃𝗲𝗿𝗲𝗱:
0:00 - Intro
1:04 - How does the FHSA work?
2:55 - Opening & Investing in the FHSA
5:01 - FHSA vs RRSP Home Buyers Plan (HBP)
6:07 - Closing the FHSA
If you’re an instructor who would like to access my slides, please reach out on:
Twitter: twitter.com/stephanieyzhou
Instagram: instagram.com/breakingbaddebt/
So good didn’t know you could combine both. Thank you
Yes it's not clear on the Government of Canada website because they haven't updated it yet!
Very helpful - thank you!
Very well explained Dr Steph.
Thank you for your support!
Thank you very much, you don't know how you help me with this information...
Thank you from a prompt update on that topic! I would add that one cannot contribute to the spouse's FHSA compare to RRSP...
Thanks Auslander for the info - theoretically you can give your spouse the money personally to fill up their FHSA but unlike an RRSP you can't claim their room as a deduction. Source: www.desjardins.com/qc/en/tips/fhsa-frequently-asked-questions.html
Very clear. Thanks
Thanks for sharing!
Thank you so much very helpful
great video steph!!
Thanks Yatin!
This was SO helpful! Thank you and I can't wait to watch your other videos 🤗 you're amazing!!!
Thank you for your support!
thank you!
Very helpful video! I have one question that maybe isn’t covered yet.
I own a property with a sibling that we do not live in and currently in the process of buying them out with my spouse to live in the house in the r next few months. Would I be able to use this FHSA account?
Hi Jason, the FHSA account will be for primary residences, not investment or leisure properties. Source: ca.rbcwealthmanagement.com/irene.so/blog/3334617-What-is-the-First-Home-Savings-Account
What if you open a FHSA, but purchase a home without it. Me and my partner have a down payment already, but are thinking of opening one for the tax savings
Can we use both husband and wife’s HBP and FHSA when only one name is on the home buying contract?
Thanks for this video, what if I already have the money for down payment in a GIC, is there a need to open the FHSA?
Even if you have a downpayment, it's still important to open the FHSA because any unused room can be rolled over into your RRSP for extra space. Don't hesitate - the deadline for opening a FHSA is end of this year!
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Thanks Alexedmartin.I have had the intentions of starting investing. But I always thought it was late and I think I need to stop procrastinating. I will definitely 🔍 Regina Louise Collaro and see what she can advise .Thanks a lot . This was of so much help to me
This is excellent for children 18 and over. There are so few tax savings in Canada , this is good in addition to tfsa and rrsp to give your children a head start. Put some high dividend Canadian banks or utilities in it
Agreed! It's a great way to help your kids get started on saving for their first home
Great! I have question though. I bought pre construction in 2020 and closing this summer. If I open it now, am I eligible for the withdrawal? Or not since I made the purchase agreement in 2020?
My question exactly, did you get an answer?
Thank you for the amazing video!
I would like to ask if I am eligible for FHSA or not, giving that I have brought a new construction home in Jan 2023 with 8% deposit, the closing and taking-over date may be by next March 2024 with the remaining down payment of 12%?
Hi Sameh, this is what the Government of Canada site says: " you will be considered to be a first-time home buyer if you did not, at any time in the current calendar year before the account is opened or at any time in the preceding four calendar years, live in a qualifying home as your principal place of residence". It defines Qualifying Home as exisiting homes and those being constructed. I would speak with a financial advisor on this as well because technically you're a home owner on Jan 2023 if that's on your purchasing documents but the confusing part is you haven't 'lived in a qualifying home' as it was still under construction.
Source: www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/opening-closing-and-fhsa.html#h_1
Good vid - can u use this money in the fhsa for anything besides home buying?
It is mainly used for first home expenses but if you don't use the money at all, it can be transferred to your RRSP without using up your RRSP contribution limit
Doing some research into this. Great video! What if I want to buy a house using my FHSA with my partner or wife. Can we both use our FHSA to contribute towards a home?
Hi Matthew, it depends on if your partner is a homeowner already or not. If they are then you can't use the FHSA, if you both are first time homebuyers then yes you both can use your FHSAs to contribute to a home.
Awesome video. I have a couple of questions through:
1. When u say Canadian Resident, does PR holders qualify?
2. If the spouse is in lower income can the other spouse contribute to a 16k per year (as a family)?
3. Does one has to wait for 5years. What If I buy a house this year and am paying mortgage do I qualify for FHSA?
Hi Abhiket, since this is a newer account there often isn't that much info released on it yet but on the Government of Canada website, it says:
1) "To open an FHSA, an individual must be a resident of Canada and at least 18 years of age." It doesn't indicate if you have to be Citizen or PR, but the way it reads to me sounds like Residents can qualify.
2) "You are not permitted to participate directly in your spouse’s or common-law partner’s FHSA. Your spouse or common-law partner is the only person who can participate in their own FHSA."
3) You don't have to wait 5 years, but if you do, that allows you to have the maximum space ($40K). If you put money in this year, you can only contribute $8K and when you buy the house and take out the $8K, it closes the account.
Hope this helps!
The only question I have is for the tax deduction part of it, does it work exaltly like a rrsp or the tax deduction is automatic.
Exemple I live in Quebec, the first 15k is tax free (stage 1) but the stage 2 you pay tax, so if you make more than 15k you put the % you can in RRSP the save money. Since i'm a miminum wage student, 19 years old. With this, do I get an % tax reduction from 8k or do and need to wait until I make more per year?
Hey! It should be similar to the RRSP (not automatic), so for example, you contribute $8K this year to FHSA and you made $23K in income this year. You can deduct the contribution of $8K on your taxes so that your taxable income will be $15K ($23K-8K = $15K). Hope this makes sense!
Is investing in a FHSA reduce Taxable income? Thanks
Hi, thank you for this video. I have a question. Do we have to keep the money for minimum 30 days in FHSA account before withdrawal the money to get the tax rebate ? For example - Today is 2nd May and our home closing date in 29th May. If we put the money today in FHSA account. Are we eligible for tax rebate at the end of year on the money we put in FHSA? Thank You
Hi Sanjeev, there shouldn’t be a minimum amount of time to leave the money in the FHSA
For dual citizen do I have to pay usa taxes if I open FHSA? I know RRSP I am exempt and ttfa I am not. Thanks
Similar to the RRSP there will be withholding taxes on the FHSA for US investments.
Hi! I would like a clarification. I am a home owner. Will I be able to open the account after I own the property for more than 5 years?
The FHSA is for people who haven't owned a home in the past 4 years - so if you've been owning that home for 5 years then you wouldn't qualify for the account. Source: www.cpacanada.ca/en/business-and-accounting-resources/taxation/blog/2022/november/faqs-tax-free-first-home-savings-account
Can someone open an FHBA after purchasing a house a month ago given the buyer never owned an eligible house before? Thanks
If you purchased a home already , you would be considered a homeowner in which case I don't think the FHSA would apply if you're no longer a first time homebuyer
They should put this video on the government of Canada website
Thanks! Yes the Government of Canada website needs the updated info about the HBP!
Thanks for this informative video. So if I am buying a house in 2023, will I be able to contribute to the FHSA after April 1st, use the money for tax deduction, and then withdraw it to buy a house in 2023?
Yes, if you contributed to the FHSA in April and took the money out to buy a house later on in 2023, you would be able to use the funds towards your first home and deduct your contribution.
I know for the rrsp (hbp) it has to be in the rrsp for 90 days before making the withdraw, is there a limit for how long $ has to be In The FHSA for thanks
Hello, id like to get your take on if i wouod be eligible for fhe FHSA.
I signed a contract for a new build back in October 2021 with a tentative in November 2023. I have not taken possession yet and do not currently have a firm closing date.
I am first time home buyer, never owned or common law.
Lets say i get firm closing date for Novemebr 10th, 2023. Would I be eligible to use the 8k in the FHSA to go toward my down payment on this home?
Secondly, lets say it closes in January of 2024 and I contribute an additional $8,000.00 before the day of closing, could I then use $16,000.00 out of the FHSA towards the down payment?
Hello, from the CRA website on what constitutes a qualifying withdrawal: "you must have a written agreement to buy or build a qualifying home with the acquisition or construction completion date of the qualifying home before October 1 of the year following the date of the withdrawal"
If the home has completed construction before October of the year before you take out the money then you would qualify to withdraw the money.
What happens if you leave Canada for good before using it ? Can you let it sit 15 years so it becomes an RRSP ? Can you add to it the same year you leave ?
So this is what the CRA says on their website: "If you become a non-resident of Canada after you open your FHSA, you can continue to participate normally in your FHSA, with one exception: You cannot make a qualifying withdrawal to build or buy a qualifying home while you are a non-resident of Canada."
Where I think would be useful to speak to an accountant about is the 'participate normally' aspect - it seems like you're able to keep your FHSA open and continue to contribute to it but you can't take anything out until you move back to Canada. I wasn't able to find anything on the CRA website for whether you can still make a direct transfer from FHSA to RRSP although you are allowed to continue to hold your RRSP even after you leave Canada.
I know for hbp (rrsp) it has to be in the account t for 90day is there a time frame for the fhsa account
Hey Megan! There isn’t a minimum number of months to keep funds in the FHSA but there is a maximum of 15 yrs you can keep funds in the account. Source: www.nbc.ca/personal/help-centre/savings-investment/saving-plans/fhsa-what-is-it-how-does-it-work.html
So I could open the account this year put $8k in and withdraw in the same year and buy this year some time then on tax season I can still claim $8k deduction ? Thanks
@@megansmith101 Hi Megan, yes you can claim the $8K deduction when you are filing the taxes that year. Source: "Your contributions made to an FHSA are tax deductible, which reduces your taxable income for the current year" from: www.nbc.ca/personal/savings-investments/fhsa.html#:~:text=Your%20contributions%20made%20to%20an,income%20for%20the%20current%20year.&text=If%20you%20decide%20to%20use,without%20affecting%20your%20contribution%20room.
I helped my parents buy a home. i am on the deed. I don’t live in it though. Would I still qualify as a first time home buyer.
Hey! This is what the government site says about this: "a taxpayer must be a first-time home buyer at the time a withdrawal is made. Specifically, the taxpayer could not have owned a home 𝗶𝗻 𝘄𝗵𝗶𝗰𝗵 𝘁𝗵𝗲𝘆 𝗹𝗶𝘃𝗲𝗱 at any time during the part of the calendar year before the withdrawal is made 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."
So while you don't live in the home and you meet the first part of the statement, for the 2nd part of the statement, you might be the beneficial owner of the home. I would suggest also speaking to a financial advisor about your specific situation. Here is an article about beneficial ownership: fintrac-canafe.canada.ca/guidance-directives/client-clientele/bor-eng
And if a person is a first time home buyer, buys a place for investment and don't live in. Is it still entitled to have the FHSA once buy something to move in?
Hi Leandro, this is what the Government of Canada says about it: "The taxpayer 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." So when you're filing taxes and not using the home as a principal home, it would disqualify you from using the FHSA. Source: www.canada.ca/en/department-finance/news/2022/08/design-of-the-tax-free-first-home-savings-account.html
Hi, Once I withdraw fund from FHSA account, I would like to know for what purpose I can use the amount? For example: Down payment, mortgage prepayment, furniture for new house, or renovation of the first house if I withdraw within 30 days of purchase. I have already done with down payment without FHSA, so can I use for furniture etc? Do we need to show payment receipt of purchase? Appreciate if you can please clarify. Thanks
Hi Afzal, from this website it says "Once withdrawn, the funds can be used for your down payment, closing costs, or even home expenses such as furniture." Source: www.moneywehave.com/what-is-the-first-home-savings-account/
@@BreakingBadDebt Thanks a lot. So do we need to submit a proof of purchase of furniture (after withdrawal) with the stipulated 30 days? Or can we invested in furniture later in time after withdrawal within 30 days of house purchase?
@@afzalashraf30 That would be a good question for your accountant filing the taxes for you that year. I always think you should keep the proof of purchase for your furniture in case you get audited.
So when you save your money in Canadian banks you have to pay tax?
When you are just putting your money into a Canadian bank savings account, the only tax you would pay is on the interest earned from that account.
Thanks Dr. Steph! Very helpful, especially the clarification both the RRSP HBP and the FHSA can be used together.
Did they take out the rule it's for first home buyers age 40??
Hi Minnie, the current age limit is between 18 and 71 years old. No mention in the budget of the 40 year old age limit. Source: www.budget.canada.ca/2022/report-rapport/tm-mf-en.html#a2_1
I’m not clear with when the FHSA closed at 71 yrs old or after 15yrs … the gains in the FHSA do we need to pay taxes ? Or it will tax only in the 40k of contribution amounts?
Hey Oanh, the FHSA can only be open for15 years OR when the holder turns 71. So if you open the account at age 18, then you have have that account only until 33 years old. Or if you open the account when you're 69, then you can only use that account until you're 71. Similar to a TFSA the capital gains aren't taxed. See 1:04
@@BreakingBadDebt and how about the 15% rule holding tax with the US dividend stock ? Does it apply same rule like the RRSP account too ?
@@oanhpham8780 Hi Oanh, since the FHSA is not a retirement account like the RRSP, there will be the 15% withholding tax applied to US dividend stocks. Source: www.taxtips.ca/fhsa/first-home-savings-account.htm#fhsa-withholding-tax-on-foreign-dividends
@6:51 instead of 75,000$, wouldn't it be 35,000 + whatever your 40,000$ grew into..
so if you have 35K in HBP and your contribution was 40K but it grew to be 50K in your HFSA by the time you want to withdrawal to buy a home. you have 85K to take out toward your home?
Hi Michael! Yes, that's right - if your FHSA investment grew, then you can potentially have more than the $40K max contribution room in that account!
Lets say i really want to buy a home now. I have 40k in fhsa and 35k for my hbp (rrsp). Now if i withdrawal the combined amount of 75k, do i have to pay back the 75k in 15 yrs or does that only apply to the 35k? In other words, i only need to pay back the 35k portion withdrawn from hbp over span of 15yrs.
In addition, i think i can actually withdrawl more than 40k portion from fhsa, in the case where i make gains on investments. All of that tax free. 40k is only the lifetime contribution limit for a fhsa
The portion you repay is the 35K because that’s coming from the RRSP HBP. You don’t need to repay the FHSA component, including if you made any gains.
Thanks Dr Steph. Question: If you want to buy with a friend, partner, can you qualify for using the HBP + FHSA BOTH, just like a couple/spouse, or no?
Hi Zakiya, I haven't read anything about buying with a friend, but as long as you both meet the qualifying criteria, I don't see how that's different from buying with a spouse or a common-law partner. I would definitely speak with a real estate lawyer when buying a home with a friend to draft out an agreement as conflicts can arise when sharing living spaces.
Can I keep the money from the FHSA in the FHSA instead of using it on my house and then transfer it over to my RRSP in 15 yrs?
If I am a first time homebuyer but my fiance is not, can I still use this when we buy a house collectively and become married? If I am not able to use this I guess it becomes the same question as above, can I just keep it for 15 yrs and then transfer it to my rrsp?
Each FHSA is attached to 1 person, so if your fiance is a homeowner already, they wouldn't qualify for the FHSA but you would be able to contribute your portion to the marital home. If you don't end up using the FHSA to buy a home you would roll over your money from your FHSA to your RRSP within 15 years. BUT this is the part where there's not much info because if you bought a home, just not using FHSA funds - are you still allowed to use the account if you're already a homeowner? So I'm not sure if CRA will put out more info on this or make you transfer FHSA funds to RRSP the moment you become a homeowner. Source: www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/transferring-funds-between-fhsas-other-registered-plans.html
@@BreakingBadDebt thank you. So I am still eligible for the FHSA if we buy a house together even tho he is not? As an aside, If we buy a house together, will i still be able to take advantage of the first time home owner benefits (land transfer taxes etc) if my spouse is not a first time home buyer but I am?
Yes at this point I can see myself using the FHSA as an extended and early rrsp rather than for my first house. I don't see anything against it in the rules but probably not encouraged
@@vkwt Hey so I looked into it some more because I wasn't sure if you were living in the same home or separate homes before getting married, as some couples may not live together before marriage. If you lived in his home in the current year or preceeding 4 years you would not count as a first time home buyer. Source: www.sunlife.ca/en/investments/fhsa/
For the First Time Homebuyers Tax Credit it's the same idea as well "You did not live in another home that you (or your spouse or common-law partner) owned in the year of acquisition or in any of the four preceding years (first-time home buyer)" Source: www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31270-home-buyers-amount.html
@@BreakingBadDebt hi Steph, I do not live in his home and have never had my own home. When we buy a house together, will I still qualify for the FHSA and first time homeowners benefit if he has owned a home before the one we buy together?
this is a phenomenal way of teaching Dr. Steph! thank you for simplifying complex concepts in a digestible manner, looking forward to more videos!
Thanks Ali for the kind messages!
So lets say if i save 20k money with in 3 years and i took money for the house. How can i stop collecting money from FHSA ?
If you saved money inside the FHSA and then took it all out to buy a house then by Dec 31 of the following year your account will cease to be a FHSA.
Thanks so much for this in depth breakdown Dr. Steph! This made it very clear. Subbed to your channel for your future videos :).
Very helpful video. RRSP + FHSA is still far from making homes in GTA affordable or accessible.
How can you buy a with a home for $40,000 that is the maximum. Give it up unless you need a tax break.
Thank you, Dr. Steph! This video definitely further solidifies my understanding of my own research on this account.
However, few questions for you (apologies in advance if you have already answered these before):
1)On the Government of Canada website, regarding the closing of the account, there was another way where the year following your first qualifying withdrawal from your FHSA - does this mean the account will close when it reaches that one year after my first withdrawal?
2)In the case of closing the account as described in 1) above, what happens to the leftover amount in the FHSA - does it get close to RRSP or RRIF like you mentioned in the video?
3)Are there limitations/restrictions when it comes to making withdrawals (ie, max. amount per withdrawal, number of withdrawals per year)?
4)Should I wish to transfer money from FHSA to another account (ie another saving account), would there be a penalty or this is treated as a withdrawal, and therefore same rules are applied?
Thank you in advance!
Hey Sussan, since this is a pretty new account, what I answer below is based on sources I find on the government and banks websites (so not financial advice):
1) In the following year (Dec 31) after you make your first withdrawal the account will be closed. There was an example given on the government's website that I'll link here: www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/opening-closing-and-fhsa.html
2) If you don't withdraw the money left over, then after Dec 31 of the year following the year you made the purchase, it will count as taxable income.
3) To my knowledge, I didn't read anything about a restriction to how many times you can make a withdraw as long as they're going to the same qualify property.
4) If you transfer money from the FHSA, you can only transfer to the RRSP without it counting as taxable income. According to the government: "In order to make a direct transfer, you must not withdraw the property yourself and contribute it to another one of your plans or accounts. Those transactions would not be considered a direct transfer and would cause unintended tax consequences." Source: www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/transferring-funds-between-fhsas-other-registered-plans.html
Awesome explanation. Very easy to understand. Thank you.
Is there an age limit? I remember the Liberals saying during the election this plan was for people under 40. Has the age restriction been eliminated? Can you buy a property from a relative at end of the 5 years or does it have to be an arms length transaction?
Hi Ryan, the current age limit is between 18 and 71 years old. No mention in the budget of the 40 year old age limit. For the buying from a relative, you have to have “a written agreement to buy or build a qualifying home”. Source: www.budget.canada.ca/2022/report-rapport/tm-mf-en.html#a2_1
Can I put in $40k in one shot?
I am 22 and I should have $40k in room right?
Hey you have a lifetime limit of $40K but you can put in a limit of $8K each year. So lets say you open the FHSA this Apr 2023, you can't just put in $40k, only $8K. See 1:47 of the video for reference.
I just want to add that even if you don't own a home or never did own a home... but you are leaving with common low partner or spouse ... you cannot open FHSA ...
I mean if he or she own home at present.
Thanks for the additional info!
If you contribute the max $40,000 and after 10 years it grows to $60,000 (only for an example), and you want to close it and put it to the RRSP, how much contribution room do you need? Do you need only $40,000 or $60,000?
Update: The HBP would continue to be available as under existing rules. However, an individual would not be permitted to make both an FHSA withdrawal and an HBP withdrawal in respect of the same qualifying home purchase.
Hey Daniel, do you have the link to this update? The Nov 2022 reading of the legislation permits you to use both. Source: www.advisor.ca/tax/tax-news/first-time-homebuyers-can-use-fhsa-and-hbp-feds-propose/
It's been changed.