Are you eligible for a First Home Savings Account?
The First Home Savings Account (FHSA) was created to help Canadians buy their first home. Contributions to the account are deductible, returns are tax-sheltered, and withdrawals are tax-free if you're considered an eligible first-time home buyer1. Whether you're a first-time home buyer or not, it's important to review the eligibility criteria to see if you're eligible for an FHSA. Here are a few things to consider.
FHSA eligibility
You must be 18 or older (71 or younger on December 31)
You must be a Canadian resident or a Canadian resident for tax purposes.
You must be a "first-time home buyer":
You or your spouse (for tax purposes) were not the owner-occupant of a home that was your principal place of residence in any part of the calendar year before the account was opened or during the previous 4 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, as long as you meet the eligibility requirements when you open your account. However, you should know that the maximum period you can hold an FHSA is generally 15 years or less, depending on your situation.
Can you open an FHSA without making any contributions?
Yes, you can. There is no requirement to contribute to an FHSA you've opened. However, you should know that the maximum period you can hold an FHSA is generally 15 years or less, depending on your situation.
FHSAs for couples
I'm moving into a condo owned by my new legal or common-law spouse. Can I open an FHSA?
If you meet the eligibility requirements, you'll be able to open an FHSA before you become spouses for tax purposes. Once you've lived together for 12 months, you'll be considered common-law spouses. You'll no longer be eligible to open an FHSA, since your principal place of residence will be the condo that belongs to your spouse.
If my spouse dies or we separate, would I be eligible for an FHSA?
If you were not the owner of your principal place of residence in any part of the calendar year before the account was opened or during the previous 4 calendar years, and you meet the other criteria, you would be eligible.
FHSA and owners
I own a cottage in the country, but for the past 7 years I've been living full-time in a rented condo in the city. Am I eligible to open an FHSA?
Yes, since your cottage has not been your principal place of residence. However, you'll also have to meet the other conditions.
I just signed an offer to buy my first home. Can I open an FHSA before I take possession?
Yes, as long as you haven't occupied a property as your principal place of residence that you or your legal or common-law spouse owned at any time in the year before the account was opened or in the 4 preceding calendar years.
I haven't owned a home for 7 years, but I still have an outstanding balance to pay on my Home Buyers' Plan (HBP). Am I eligible to open an FHSA?
Having an HBP has no impact on your FHSA eligibility, and since you were not an owner in any part of the current year or during the previous 4 calendar years, you can open an FHSA.
FHSA and income properties
I live with my parents but own a duplex that's fully rented out. Can I open an FHSA?
Yes, if you meet the FHSA eligibility requirements. Owning a rental property does not disqualify you from opening an FHSA.
Examples of situations where you can't open 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 co-owned a house with my former spouse, which was sold 2 years ago when we separated. I'm planning to buy a semi-detached home in a few years, which will be my principal place of residence. Can I open an FHSA?
Since you don't currently meet the first-time home buyer criteria, you'll have to wait before opening an FHSA. Unlike the HBP, the FHSA requirements do not change if you separate. In the short term, and under some conditions, the HBP could be the best way to save for a home purchase.
Eligibility criteria for making a tax-free withdrawal from a TFSA1
You must be a Canadian resident or a Canadian resident for tax purposes.
You haven't been an owner-occupant of a home for the period starting the fourth calendar year before the withdrawal and ending on the 31st day before the withdrawal.
Before the withdrawal, you've signed a written agreement to buy or build a qualifying home before October 1 of the calendar year following the year of the withdrawal.
You must not have bought the qualifying home more than 30 days before the withdrawal.
FHSAs for couples
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 principal place of residence, regardless of the nature of your relationship with the other owners.
I moved into a condo owned by my spouse 2 years ago. Can I make a tax-free withdrawal from my FHSA to buy half of the condo?
You can make a tax-free withdrawal from your FHSA if all the conditions are met when you withdraw the funds. Unlike the FHSA conditions, the fact that your spouse is the owner of your principal place of residence does not affect your eligibility to make a tax-free withdrawal from your FHSA.
FHSA for multiple generations
Can I use funds from my FHSA to buy or build a multigenerational home?
Yes. In addition to single-family home and condominiums, FHSA qualifying homes include duplexes, triplexes, fourplexes and apartment buildings—as long as one of the units will become your principal place of residence.
When they died, my parents left me their house. I have never owned a home, and it will be my principal place of residence. Can I still use an FHSA?
If you don't already have an FHSA, you can open one and make contributions before title to your parents' property is transferred. Once title has been transferred, you'll have a maximum of 30 days to make a tax-free withdrawal. You can use these funds however you like, for example, to do some work on the house.
FHSA and land purchases
I bought some land to build my first home three years from now. 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 become your principal place of residence, not to purchase land. You'll have to wait until construction begins to make a tax-free withdrawal.
FHSA and income properties
Can I finance the purchase of an income property with funds from my FHSA?
Yes, as long as one of the units will be used as your principal place of residence. Duplexes, triplexes and fourplexes are also eligible, as long as you are the owner-occupant.
Check your FHSA eligibility
The examples above make it clear that it's important to check all of the FHSA eligibility criteria, whether you're opening an account or making a withdrawal to purchase a home. Get advice from an accountant or tax expert and personalized support from your Desjardins advisor.
1 Some conditions apply. See CRA form RC725—Request to Make a Qualifying Withdrawal from your FHSA.