Tag: first home savings account

Can I still use my FHSA after my spouse bought a condo? – MoneySense
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In CRA’s words, you are considered 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 (or what would be a qualifying home if located in Canada) as your principal place of residence that either:
- You owned or jointly owned
- Your spouse or common-law partner (at the time the account is opened) owned or jointly owned
Here are the CRA qualifications to use the funds for a home purchase:

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 withdrawal (except the 30 days immediately before the withdrawal) or at any time in the preceding four calendar years, live in a qualifying home (or what would be a qualifying home if located in Canada) as your principal place of residence that you owned or jointly owned.

Read closely

Did you spot the difference between the two definitions, opening and withdrawing? When withdrawing from the account to purchase a home, there is no mention of a spouse in the definition. It matters if your spouse owns a home when opening an account but not when you are purchasing a new home.

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The other differing clause in the definition is “except the 30 days immediately before the withdrawal.” This is important. You must withdraw money from your FHSA within 30 days of closing; otherwise, it will no longer be a qualified withdrawal and will be taxed if withdrawn. I know, you’re thinking you will use the money for the down payment, so it won’t be an issue. Perhaps, but what if you have other money for the down payment and you intend to use the FHSA for furnishings or renovations? The 30 days may quickly slip by before you get around to withdrawing the funds.

Again, you are good to continue contributing to your FHSA and then use the funds to purchase your first home even though you are living with your wife in the home she owns.

Other FHSA rules worth noting

You made a really good decision to use the FHSA to save for a home. It is one of the best, if not the best, accounts available to anyone who qualifies and plans to purchase a home sometime in the next 15 years. When used as intended, you get a tax deduction on the money you contribute, just like a registered retirement savings plan (RRSP) contribution. Then, when you draw money to purchase a home, your money comes out tax-free, just like a tax-free savings account (TFSA). It’s the best of both worlds—you never pay tax on that money, coming or going!

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You can add $8,000 per year to a FHSA to a maximum contribution limit of $40,000. The tax deduction doesn’t have to be claimed in the year you make the contribution and can be saved for future years when you have a higher income. When you claim and receive the tax refund, do your best to save it. It can be added to an RRSP, allowing you to use the RRSP Home Buyers Plan, or to a TFSA.

Compare the best FHSA rates in Canada

It is important to note that you can catch up past FHSA contribution room, but only back to the year you opened the account. This is different from a TFSA, where you can go back as far as when you were age 18 or the TFSA inception date (2009), whichever is sooner.

When catching up, the most you can add to a FHSA in any given year is $16,000, meaning you can only catch up one year at a time. For anyone about to purchase a home without an FHSA and extra cash, consider borrowing $8,000 to open a FHSA. You can claim the $8,000 as a tax deduction and use the tax savings to purchase an appliance or two. For someone in a 30% tax bracket, you would benefit from about $2,400 in tax savings. Once your home closes, withdraw the $8,000 and pay off the loan and you will have paid very little interest.

The FHSA escape clause

If it turns out you never purchase a home or can’t make a qualifying withdrawal, you can transfer your FHSA funds to an RRSP. You won’t get a tax deduction because you got that when you contributed to the FHSA. What you do get, though, is an extra $40,000 of RRSP contribution room.

This was a good question, Shelly. The FHSA is a good, seemingly straightforward account—but you do have to be to be onside with the definitions.

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Read more about buying real estate:

About Allan Norman, MSc, CFP, CIM

With over 30 years as a financial planner, Allan is an associate portfolio manager at Aligned Capital Partners Inc., where he helps Canadians maintain their lifestyles, without fear of running out of money.
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Allan Norman, MSc, CFP, CIM

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January 29, 2026
How changes to the Home Buyers’ Plan could affect your down payment – MoneySense

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Earlier this year, the HBP got a significant makeover. Here’s what’s new about the HBP, plus how you can use it together with other savings tools: a first home savings account (FHSA), a tax-free savings account (TFSA) and—recently introduced in Canada—EQ Bank’s Notice Savings Account. Read on for more details.

How has the Home Buyers’ Plan changed?

Home buyers should know about two major changes to the HBP. First, you can take out more money from your RRSP to buy or build a home—the maximum withdrawal amount has increased from $35,000 to $60,000, as of mid-April 2024. Couples can withdraw up to $120,000.

Second, you have more time to pay back your RRSP. As a temporary relief measure, home buyers who make an HBP withdrawal between Jan. 1, 2022, and Dec. 31, 2025, have five years to start repayment. Previously, the grace period was two years. The repayment period itself hasn’t changed—it’s still 15 years.

These changes were announced as part of the 2024 federal budget in April, among other measures aimed at improving home affordability in Canada.

Combining the HBP and the FHSA to buy a home

April 1, 2024, marked the one-year anniversary of the first home savings account (FHSA), a registered account that gives aspiring home owners $40,000 of additional tax-free savings room to save for a down payment. The FHSA has proven to be highly popular—as of April, more than 750,000 Canadians have opened one, according to the federal government.

“Home ownership is an integral part of most Canadians’ financial goals, and saving and planning are the cornerstones of achieving this dream,” says Mahima Poddar, group head of personal banking at EQ Bank. “The FHSA is an important tool in this journey, and it’s never too late to open one.”

The FHSA contribution limit is $8,000 per year, and you can carry forward up to $8,000 of unused room for one year. By 2028, Canadians who opened an FHSA in 2023 will have the full $40,000 of contribution room.

FHSA contributions are tax-deductible, and FHSA withdrawals are tax-free. Any money you earn inside the account is tax-free, as long as it goes towards buying a home. All of these benefits help buyers reach their savings goal faster.

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Jaclyn Law

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August 1, 2024
Tax changes to know about for 2023, from home offices to house flipping – MoneySense

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The credit lets home owners claim 15% of the renovation cost up to a maximum of $50,000, potentially allowing them to subtract as much as $7,500 from their income tax.

However, the mother-in-law suite must be self-contained.

“It has to have its own entrance, its own kitchen, bathroom, sleeping area,” noted Cestnick. “You can’t just sort of carve up one room of the house and then renovate it and claim the tax credit.”

House flipping rules

As of Jan. 1, profits from the sale of residential properties owned for less than a year are taxed as business income, rather than treated as a tax-free capital gain if it’s your primary residence.

“The government’s been concerned about people who are buying, fixing up and flipping properties. For many years people have been kind of abusing the rules and calling these properties their principal residences and really not paying any tax,” Cestnick said.

However, there are some key exceptions.

“The government doesn’t want a rule like this to require people to stay in bad marriages or to stay with somebody if there’s a threat of domestic violence,” Ewing said. A death, illness or disability might also allow for a sale soon after purchase that would be exempt from taxation.

New trust filing requirements

The reporting rules around trusts have expanded to include taxpayers who didn’t have to note them on their returns before.

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The Canadian Press

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March 14, 2024
How much money should I have saved by age 25? – MoneySense

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The Canadian federal government eliminated the accumulation of interest on Canada Student Loans, as of April 1, 2023, but you must still pay any interest accrued before then. Some provinces and territories—Alberta, Saskatchewan, Ontario, Quebec, Nunavut and the Northwest Territories—charge interest on their portion of student loans. The interest rate varies, but it’s typically the prime rate plus a percentage. Ontario, for example, calculates interest at prime rate (currently 7.2%) plus 1%.

2. Build an emergency fund

Once your credit card debt is paid off and you’re on track with repaying your student loans, next on the agenda should be building an emergency fund, which should cover at least three months of living expenses. This will be helpful for situations like getting laid off, a car breakdown, a sudden health condition that doesn’t allow you to work, and so on.

You do have a few options for where to stash your cash, including registered accounts, but in an emergency, you’ll likely want fast and easy access to your money. A high-interest savings account (HISA) pays significantly more interest than a regular savings of chequing bank account, and you can withdraw the funds anytime.

3. Set goals—and set up savings plans to fund them

Once you have a solid debt repayment plan and an emergency fund, you can allocate some funds towards your future financial goals. Maybe you’re adopting a pet, or you’re starting a side hustle and need start-up costs. Maybe you’re aiming to take a big trip or buy a car in the next few years. An automated savings plan—which transfers a set amount to a specific savings account—can help you accomplish this faster. At CIBC, for example, you can set up AutoSave in your bank account to transfer a set amount—say, $100—to a specific savings account each time your paycheque is deposited. (This is what financial experts mean by “paying yourself first”!)

Your monthly contributions may be as small as $20 a week or as high as $100 or more, but the key is that they will add up over time. You want to maximize the interest you earn on it. Remember that compound interest info above? It applies in a positive way, too. You can earn interest on the interest you’ve saved. Check out our compound interest calculator—it may blow your mind to see how savings can grow over 30 years. (Your parents and future financial advisor will be impressed, too.)

Again, a HISA is a good option that pays more interest than a regular bank account. Currently, you can find HISAs with interest rates of 2.5% to 5.75%, which might include limited-time promotional offers* that pay additional interest for a few months to a year. While these rates can change, using a HISA can be a great wealth-building tool in the short term. And if the HISA is held in a TFSA, all the investment income you earn is tax-free.

Boost your savings with a special interest rate when you open your first CIBC eAdvantage Savings Account. Limits apply.

4. Choose your financial advice carefully

Parents and friends all have their own ideas about how best to save—especially if they’ve had success buying real estate or made a lot of money investing in the stock market. While some of their tips might be valid, true, their advice might not apply to your unique financial situation.

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Anna Sharratt

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February 28, 2024
2022 Income Tax Guide for Canadians: Deadlines, tax tips and more – MoneySense
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Prepping your taxes, including the 2022 tax brackets

Even if someone else does your taxes, you still have some prep to do. You will have to gather your documents to file your 2022 taxes, and here is a list to consider:
- T-slips, including:
  
  T4 (employment income);
  
  T4A (self-employment/pension/annuity income);
  
  T5013 (partnership income);
  
  T4A-P (Canada Pension Plan);
  
  T4E (employment insurance benefits);
  
  T3, T5, T5008 (interest, dividends, capital gains);
  
  T4A-OAS (Old Age Security);
  
  T4RSP (RRSP income);
  
  T4RIF (RRIF income);
- Other forms that you can use to summarize income and expenses for your taxes:
  
  T2125 (statement of business or professional activities);
  
  T776 (rental income and expenses);
  
  T2200/T2200S (employment expenses)
- Log of other income, such as tips
In addition to this list, you may also need receipts for the following: registered retirement savings plan (RRSP) contributions, school-related costs and income (such as tuition, scholarships, student loan interest, teaching supplies, etc.), childcare, medical expenses, charitable donations, digital news subscriptions, home buying expenses (Home Buyers’ Plan, moving expenses, etc.), sale of assets (real estate, investments, etc.) and more.

Here is a handy list of all the tax brackets in Canada for every province and territory. They can help you estimate what you may owe by figuring out where you are income-wise, which may help to plan accordingly for last minute RRSP contributions.

Read: The 2022 tax brackets in Canada, based on annual income and broken down by province, too

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RRSP contribution room

The deadline for RRSP contributions is March 1, 2023, for the 2022 tax year. One of the biggest benefits of putting money into an RRSP is that it lowers the amount of income tax you’ll pay, both this tax year and in the long term. (It’s a myth that RRSPs are considered risky.) Whatever you contribute (up to your RRSP contribution limit) is deducted from your taxable income, meaning you could owe less tax or receive a bigger refund. It’s not until you withdraw from your RRSP that that amount is added to your taxable income. The ideal time is when you are retired and in a lower tax bracket than you were during your working years. So, you save in the long run, too.

Read: The best RRSP investments
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Lisa Hannam

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December 29, 2023
Your FHSA timeline: What to invest in and when – MoneySense
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Fortunately, there are a number of ways to save for a down payment on your first home, including the first home savings account (FHSA). This registered account was introduced in April 2023 to help first-time home buyers in Canada. And it can be used in conjunction with other government programs including the Home Buyers’ Plan, First Time Home Buyer Incentive and Home Buyers’ Tax Credit. The FHSA has an annual contribution limit of $8,000, up to a lifetime maximum of $40,000, and the account can stay open for 15 years. Cash and investments held inside an FHSA can grow tax-free, and there’s no tax on FHSA qualified withdrawals.

FHSAs can hold a wide variety of investments, just like with other registered accounts. How your FHSA’s investment portfolio is structured should reflect your personal goals, timeline, financial circumstances and risk tolerance. These factors are likely to change over time, which means your investment strategy should change, too. Here’s why that is and how to plan your investments accordingly—plus, when you should open an FHSA.

What types of investments can an FHSA hold?

Like a tax-free savings account (TFSA) or other registered investment accounts, your FHSA gives you options. You can put cash into the account on a regular basis and earn a bit of interest over time, but if you want to potentially grow your money and keep pace with inflation, there are other options to consider. Here’s a quick overview. For personalized advice, speak to a financial advisor. Note that because an FHSA is a registered account, any capital losses can’t be claimed against capital gains.
- Stocks/equities: Stocks, also called equities, represent part ownership in a company. Stocks are traded on stock exchanges. Some companies distribute part of their profits to shareholders in the form of dividends (typically monthly, quarterly or annually). You may also earn capital gains or have capital losses on your stocks at the end of the year.
- Mutual funds: Mutual funds are pooled investments that hold a portfolio of securities, such as stocks or bonds. Depending on the securities they hold, mutual funds can earn interest, dividends or capital gains. They can be bought from qualified advisors, brokerage firms and fund companies.
- ETFs: Exchange-traded funds are similar to mutual funds in that they’re pooled investments that hold a portfolio of securities. Unlike mutual funds, ETFs are bought and sold on a stock exchange.
- Bonds: A government or corporate bond will receive a fixed interest rate for a predetermined period of time, making it a reliable, low-risk investment choice. Your capital is returned when the bond matures at the end of the specified time period, and you’ll earn interest, capital gains or both. Bonds are also sellable on the bond market, which is great for liquidity, but that means a bond’s value can change.
- GICs: Guaranteed investment certificates are another low-risk option. Similar to a bond, a GIC is an investment asset with a fixed interest rate and specified maturation date. It’s predictable and, because there’s an end date involved, it’s easy to plan around. And you can even ladder your GICs to buy varying terms and reinvest the growth.
Adjusting your FHSA investments over time

Similar to when you invest in a registered retirement savings plan (RRSP), a registered education savings plan (RESP) or a TFSA, you can review the makeup of your FHSA as needed. You can make changes that reflect your current goals and financial situation.

For example, if you’re hoping to purchase your first home within five years or less, you may want to be fairly conservative with your investments (choosing bonds, GICs, and conservative ETFs and mutual funds, for example). A tight timeline leaves less tolerance for market fluctuations.

On the other hand, if your plan is to buy a home in seven to 10 years’ time or longer, you could consider choosing higher-risk (and potentially higher-reward) investments at first. Over time, and as you approach your savings goal, you could shift your asset allocation towards lower-risk investments. That said, it’s best to stay within your personal comfort zone—if your investment portfolio is keeping you up at night, your asset mix may not be the right fit for your risk tolerance.

One way to reduce risk is through diversification. For example, Fidelity Investments offers All-in-One ETFs that provide exposure to a variety of assets in one investment. This can carry lower risk than holding a handful of individual stocks. You can choose from different asset allocations. A more conservative investor may choose a higher allocation to fixed income, like in Fidelity’s All-in-One Conservative ETF (ticker symbol FCNS). Someone with a higher risk tolerance (or a longer savings timeline) may want all equity, like in Fidelity’s All-in-One Equity ETF (FEQT). The approach is up to you. (Read more about Fidelity’s All-in-One ETFs.)

Where (and when) to open an FHSA

The FHSA is available through Fidelity Investments and other financial institutions. To qualify, you must be a first-time home buyer in Canada who is at least 18 years old but not older than 71.
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Erin Pepler

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November 28, 2023