Since March 1, 2023, Canadians have been able to contribute to an FHSA. This acronym stands for First Home Savings Account. Contributions to this registered plan are deducted from your income. As a result, they generate a tax refund at the end of the year, just like RRSP contributions.

Further reading: Benefits of FHSAs

The money invested in an FHSA then grows tax-free. You can contribute up to $8,000 per year. The lifetime contribution limit is $40,000. Since it’s an individual account, your spouse can also open an FHSA. Together, you can contribute up to $80,000. You can then withdraw that amount and its tax-preferred returns to buy a home, subject to certain conditions.

Further reading: FHSA contributions

If you no longer intend to buy a home, what happens to your FHSA?

Your FHSA can stay open for 15 years or until the year you turn 71, whichever comes first.

If you don’t buy a home in the meantime, you have two options:

  • Transfer your FHSA funds directly to your RRSP or RRIF. This transfer is tax-free and will not affect your RRSP contribution room. You must also transfer your FHSA to a RRIF as soon as you turn 71.
  • Withdraw the amount from your FHSA. This withdrawal will be taxable on the current year’s income tax return.

Can I open an FHSA if I own a rental property?

Yes, but you must be a first-time home buyer, which means 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.

Need help figuring out what’s right for you?

An advisor can help put together a solid plan that suits your goals.

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.