To be eligible to open a FHSA you must:
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- Be a resident of Canada
- Be at least 18 yeas old
- Be 71 years of age or younger
- Not lived in a home owned by you or your spouse in the year that you open the account
- Not have had a previous FHSA used to buy a home
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Contributions to your FHSA are tax deductible. You may contribute up to $8,000 per calendar year, up to a maximum of $40,000 over a 15-year period. Be careful not to over contribute because there will be a 1% tax penalty per month for contributions over the FHSA contribution limit.
Only you can contribute to your FHSA. Your spouse may gift you money to contribute, in which case you will receive the corresponding tax deduction, not your spouse.
You will have 15 years from account opening to use the funds in the FHSA toward a qualifying purchase. If two of you are purchasing a home together, you may both use your FHSA funds toward the purchase, giving you a combined maximum of $80,000 plus investment growth, if you both contributed the full amount.
If FHSA funds are not used within 15 years from account opening, or by December 31st of the year you turn 71, you will have the option to transfer the accumulated finds into your RRSP/RRIF. Transfers to an RRSP/RRIF are not taxable, but withdrawals from the plans are taxable as income upon withdrawal. You will also have the option of just withdrawing the funds in your FHSA as taxable income.
You may withdraw the funds from your FHSA tax free if you use the funds to buy a home, in Canada, and it becomes your principal residence.
