First Home Savings Account (FHSA)
What is a First Home Savings Account (FHSA)?
The FHSA is a tax-free1 way to save for a down payment on your first home. FHSA contributions are tax deductible, and your savings will grow tax-free, just like your Registered Retirement Savings Plan (RRSP). You can also take out money from your FHSA for a qualifying home purchase without paying tax2.
Whether you’re just starting out or have been putting away money for a down payment for a while, this new registered account makes it easier to reach your home ownership goals, faster.
Why should I open an FHSA?
Grow your savings, tax-free
Whether you invest in high-interest savings accounts, GICs, mutual funds or other investments, your FHSA savings will grow, tax-free1, allowing you to keep more of the money you put away for your first property.
Reduce your taxable income
When you put money into your FHSA, every dollar can reduce your taxable income for the year (just like contributions to an RRSP).
Flexible ways to invest
Change of plans? No problem. Any unused FHSA savings can be transferred, without being taxed, to another registered account, such as your RRSP or Registered Retirement Income Fund (RRIF).
Who is eligible to open an FHSA?
Canadian residents between the ages 18 and 71 are eligible to open an FHSA3. Keep in mind, when it comes time to use your FHSA money for a home, there are a few restrictions, including:
- You must be a Canadian resident and a first-time homebuyer
- You’ll need proof that you intend to purchase or build a qualifying home
- You must plan to occupy the home within one year, as your principal residence
- You must have a valid Social Insurance Number
The Canada Revenue Agency (CRA) considers you a first-time homebuyer if you have not occupied a home that you, or your current spouse or common-law partner, have owned in the last four years. If you live with a disability, or are helping a disabled relative to buy or build a home, there may be exceptions.
Find out more at Canada Revenue Agency’s FHSA page.
How to open an FHSA with Meridian
When you’re ready to open an FHSA, you want flexibility, support, and the best opportunity to grow your savings. At Meridian, we’re proud to offer several investment options as you save towards your first home.
High Interest Savings Account
Earn 5.00%* until May 31, 2024 when you open an FHSA high interest savings account (or HISA). This is a risk-free place to hold funds within your FHSA. In some ways, it functions like a regular savings account that pays you interest on your balance. You can move HISA savings to a GIC, or to other types of investments within your FHSA, at any time.
Guaranteed Investment Certificates
A risk-free way to grow your money. A Guaranteed Investment Certificate (GIC) keeps your principal investment safe and comes with a guaranteed rate of return. Choose from a variety of low-risk investments to build a balanced portfolio within your FHSA.
Mutual Funds
A mutual fund is a collection of investments like stocks, bonds, and other funds. It lets you pool your money together with other investors, making it easier for you to own a more diverse array of investments. At Meridian Wealth, we’re proud to offer FHSA-eligible investments like mutual funds through Aviso Wealth.
Make your own investment decisions within your FHSA
At Meridian, we’ve partnered with Qtrade Direct Investing™ to offer a do-it-yourself approach for your FHSA. Make the most of low trading fees and the freedom to buy and sell stocks, bonds, ETFs, and mutual funds with confidence.
How does an FHSA compare to an RRSP or TFSA?
The FHSA has similar tax benefits to RRSPs and TFSAs. Like an RRSP, FHSA contributions are tax deductible, and your savings will grow tax-free1. Like a TFSA, you can withdraw your savings without having to pay tax2, as long as the withdrawal is for an eligible home purchase.
The tax benefits of the FHSA, RRSP, and TFSA can make a big difference in the long run. While you can invest in all three registered plans at once, if you’re wondering where to contribute first, it’s important to consider your stage of life, your timeline, and your financial goals.
Frequently asked questions
Yes. Let’s say you have $2,000 to contribute this year, but expect to have more to contribute next year. Your $2,000 contribution can start to grow tax-free1 right away. Next year, you’ll have $8,000 of contribution room, plus the $6,000 of unused room from this year, for a potential contribution of $14,000. The maximum amount of unused FHSA contribution room that can be carried forward to a subsequent year is $8,000 (i.e., you can’t carry forward more than $8,000 in unused contribution room to a subsequent year).
The lifespan of an FHSA is 15 years. If you start contributing at age 25, you’ll have until age 40 to use your savings towards a qualified home purchase.
Within the HBP, you can withdraw up to $35,000 from your RRSP, to help buy or build a qualifying home. While both the HBP and the FHSA are designed to help first-time homebuyers, the HPB requires that you repay the funds to your RRSP within 15 years. The FHSA has no requirement to pay back or replace the funds you’ve used. For more information on the HBP, see Help for First-Time Home Buyers.
Yes. The HBP allows you to use a portion of your RRSP savings towards your first home. You can use both the HBP and the FHSA to maximize the amount you can put towards your first home. Unlike the HBP, there is no repayment required for the FHSA.
If you have a change in plans and decide not to use your FHSA money to purchase a home, you have two options. You can transfer the money from your FHSA to your bank account, but you will have to pay tax on the total amount. Alternately, you could transfer your FHSA funds to either your RRSP or RRIF, without having to pay tax until you eventually withdraw the money.
Yes. You can transfer money from your RRSP to your FHSA without paying additional tax, but the transfers are subject to FHSA annual and lifetime contribution limits. Keep in mind, a transfer from your RRSP to FHSA does not qualify for income tax deductions, nor does it create RRSP contribution room. In-kind transfers are not currently available for the FHSA.
Like your RRSP and TFSA, an FHSA can hold a wide range of investments. The FHSA from Meridian can hold the following investments: GICs and savings accounts. The FHSA from Meridian Wealth can hold mutual funds, stocks, bonds, and exchange traded funds (ETFs). Mutual funds, stocks, bonds, and ETFs are offered through Credential Asset Management Inc. or Credential Securities.