Curious About FHSA? Learn What Happens to the Money If You Don’t Buy a Home!
What if you decide not to use money in an FHSA for a home purchase? Don’t worry! You can transfer the funds to an RRSP or a RRIF without any penalties or affecting your RRSP contribution room. In essence, the FHSA creates additional RRSP contribution room, up to $40,000, for all Canadians who meet the definition of a first-time home buyer. So, whether you decide renting is better for you or if you inherit real estate, your money is still working for you!
However, remember that an FHSA withdrawal used for a home purchase is not taxed, whereas funds withdrawn from an RRSP or a RRIF are taxed. So, it’s definitely a sweet deal!
Unlock Your Dream Home with FHSA and Other Buying Programs
Are you ready to buy your first home? You can combine your FHSA with the Home Buyers’ Plan (HBP) to borrow up to $35,000 from your RRSP. Want to buy a home with a partner? Combine your FHSA and HBP withdrawals for a sum of at least $80,000 from your FHSAs and $70,000 through the HBP, for a total of $150,000. That’s equal to a 20% down payment on a home priced at $750,000. The FHSA was created to make buying a home more accessible for those wanting to get on the real estate ladder.
Imagine the possibilities when you include potential tax-free investment growth in the FHSA and money you’ve saved in a TFSA to boost the total amounts available for a down payment. It’s a win-win situation!
FHSA: Your Go-To Savings Tool for a Home
Here’s a chart that breaks down the key differences and similarities between FHSAs, RRSPs, and TFSAs.
| FHSA | RRSP | TFSA | |
|---|---|---|---|
| Primary purpose is saving for a down payment | Yes | Only with an HBP withdrawal | No |
| Contributions are tax-deductible | Yes | Yes | No |
| Annual contribution limit | $8,000 | Based on your personal income, with a maximum of $30,780 in 2023 | $7,000 in 2024 |
| Annual contribution limit is based on your income | No | Yes | No |
| Unused contribution room carries forward | Yes, but you can carry forward a maximum of $8,000, for a total contribution of $16,000 in a given year | Yes | Yes |
| Lifetime contribution limit (as of 2023) | $40,000 | Based on your personal income | $95,000 (for Canadians born in 1991 or earlier) |
| Account withdrawals are taxed | Depends. Not taxed when used for a home purchase. | Yes, unless used for a home purchase through the HBP | No |
FHSA Deposits: Now Insured for Your Peace of Mind
Effective April 1, 2023, the Canada Deposit Insurance Corporation (CDIC) will offer separate coverage of $100,000 for eligible deposits held in an FHSA. Canadians’ deposits are now covered under nine different insured deposit categories at CDIC member institutions. Note: CDIC covers GICs, but not other types of investments.
The FHSA: Your Pathway to Affordable Home Ownership
Buying a home can be a dream come true, but it also comes with its challenges. That’s why the FHSA was created—to make home ownership more accessible in 2024. High real estate prices, the need for a substantial down payment, and high incomes for mortgage qualification can make it seem unattainable. But fear not, the FHSA is here to make your dream a reality!
