Are you eligible for a First Home Savings Account?
The first home savings account (FHSA) is a savings plan that lets you save up for a down payment for your first home. FHSA contributions are tax-deductible, which helps reduce your taxable income. Your savings grow tax-free, and as long as you meet certain conditions and use the money to buy your first home, withdrawals are not taxed.1
Whether or not you’re a first-time home buyer, you should review the eligibility criteria to see if you can open an FHSA. Here are a few elements you should consider.
You can open an FHSA if:
- You’re 18 years of age or older (and no more than 71 on December 31).
- You’re a Canadian resident for tax purposes.
- You’re considered a “first-time home buyer” by the CRA.
- You or your spouse or common-law partner must not have owned a primary residence you were living in during any part of the calendar year before the account was opened or during the previous four calendar years.
Examples of situations where you can open an FHSA
I'm not planning on buying a home right now: can I still open an FHSA?
Yes. You can open an FHSA even if you’re not planning on buying a property, as long as you meet all eligibility requirements when you open the account. Just keep in mind that the maximum participation period is 15 years or less, depending on your situation. You can also have an FHSA without making contributions.
FHSAs for couples
I’m moving into my partner’s condo, which they own. Can I open an FHSA?
If you meet the eligibility criteria, you can open an FHSA before your relationship status changes for income tax purposes. Once you’ve lived together for 12 months, you’ll be considered common-law partners. At this point, you’ll no longer be eligible to open an FHSA, since your primary residence will be the condo owned by your spouse.
If my spouse dies or if we separate, would I be eligible to open an FHSA?
If you did not own your primary residence during any part of the calendar year before the account was opened or during the previous four calendar years and you meet all other criteria, then yes, you would be eligible.
FHSA and ownership
I own a cottage out in the country, but I’ve been living in a rental condo in the city for the past seven years. Can I open an FHSA?
Yes, since your cottage has never been your primary residence. That said, you also need to meet the other conditions mentioned above.
I just signed a promise to purchase my first home. Can I open an FHSA before I take possession?
Yes, as long as you or your current spouse or common-law partner did not own a primary residence that you were living in during any part of the calendar year before the account was opened or the previous four calendar years.
I haven’t owned a home for seven years, but I still have a balance to repay under the Home Buyers’ Plan (HBP).2 Can I open an FHSA?
Past use of the HBP has no impact on your FHSA eligibility. Since you have not been a homeowner this year or at any time during the last four calendar years, you can open an FHSA as long as you meet all of the other conditions described above.
FHSA and income properties
I live with my parents, but I own a residential building with two units that are both rented out. Can I open an FHSA?
Yes, as long as you meet all of the other FHSA eligibility requirements. Owning a rental property doesn’t disqualify you from opening an FHSA.
Good to know
Your FHSA contribution room increases by $8,000 a year, up to a maximum lifetime limit of $40,000. As long as you meet all conditions, you can use both the FHSA and the HBP to buy your first qualifying home. Keep in mind that unlike the HBP, which has a maximum withdrawal limit of $60,000, the FHSA has no withdrawal limit. Another difference is that HBP withdrawals need to be repaid, whereas FHSA withdrawals do not.
Examples of situations that prevent you from opening an FHSA
FHSA and immigration
I've been a tax resident of Canada for 3 years, and I owned a house in my country of origin before immigrating to Canada. Can I open an FHSA?
Since you owned a home that was your principal place of residence during the previous 4 years, even if it was abroad, you'll have to wait until you meet the criteria for a first-time home buyer. In the meantime, if you have contribution room, you can contribute to a tax-free savings account (TFSA) or a registered retirement savings plan (RRSP).
FHSA and separation
I owned a house with my former spouse. We sold the property two years ago when we split up. I’m planning on buying a semi-detached home in a few years, which will be my primary residence. Can I open an FHSA?
Since you’re not currently considered a “first-time home buyer,” you’ll have to wait before you can open an FHSA. Unlike the HBP, the FHSA requirements do not change if you separate. In the short term, and subject to certain conditions, the HBP might be your best option when it comes to saving for a down payment.
Eligibility criteria for making a tax-free withdrawal from a FHSA1
You must be a Canadian resident for tax purposes.
You must not have been the owner-occupant of a home that was your primary residence at any time during the current year or the last four calendar years before the withdrawal, except for the 30 days immediately preceding the withdrawal.
You must have signed a written agreement prior to the withdrawal to buy or build a qualifying home before October 1 of the calendar year following the year of the withdrawal.
- You must not acquire the qualifying home more than 30 days before the withdrawal.
- You must occupy or intend to occupy the qualifying home as your primary residence in the year following the purchase or construction.
FHSA among friends
Can I use an FHSA to buy a first home with a friend who is not my spouse?
Amounts accumulated in your FHSA can be used to pay for your share of a property that will become your primary residence, regardless of the nature of your relationship with the other owners.
Two years ago, I moved into a condo owned by my spouse. Can I make a tax-free withdrawal from my FHSA to buy half of the condo?
Yes, you’ll be able to make a tax-free withdrawal from your FHSA as long as you meet all of the eligibility requirements at the time of the withdrawal. Unlike the conditions you need to meet to open an FHSA, your spouse being the owner of your primary residence doesn’t affect your eligibility to make a tax-free withdrawal from your FHSA.
FHSA across generations
Can I make a tax-free withdrawal from my FHSA to buy or build a multi-generational home?
Yes. In addition to single-family homes and condominiums, qualifying homes include buildings with two, three or four units, and apartment buildings, as long as one of the units will serve as your primary residence.
When they died, my parents left me their house. I have never owned a home, and the house will be my primary residence. Can I still use an FHSA?
You can open and contribute to an FHSA before the title to your parents’ home is transferred to you. Once the ownership title is in your name, you’ll have 30 days to make a tax-free withdrawal. You can use these funds in various ways, including to pay for renovations.
Using an FHSA to buy land
I’m buying a piece of land that I plan on using to build my first home in three years. Can I withdraw funds from my FHSA now?
For self-build projects, your FHSA can only be used to finance the construction of the home that will serve as your primary residence, not to buy the land. You’ll have to wait until construction begins before you can make a tax-free withdrawal.
FHSA and income properties
Can I make a tax-free withdrawal from my FHSA to buy an income property?
Yes, as long as one of the units will serve as your primary residence and all other conditions are met. Homes with two, three or four units are also eligible, as long as one of the units is your primary residence.
Check your FHSA eligibility
The examples above show why it’s important to double-check that you meet all of the FHSA eligibility criteria, whether you’re opening an account or making a withdrawal to buy a qualifying home. Check in with a Desjardins advisor for personalized support. Depending on your tax situation, you may also benefit from the assistance of a specialized professional such as an accountant or tax expert.
1 Certain terms and conditions apply. See CRA form RC725—Request to Make a Qualifying Withdrawal from your FHSA.
2 Certain terms, conditions and restrictions may apply. For more details about this plan, see: www.desjardins.com/en/mortgage/home-buyers-plan.html