Using an FHSA to Buy Your First Home in Ontario: Rules

The First Home Savings Account, or FHSA, lets first-time buyers save for a home with tax advantages. Many Ontario buyers hear about it long before they are ready to make an offer, and the rules about who qualifies and when you can withdraw are easy to get wrong.

This article walks through who can open an FHSA, how much room you have, what you must meet for a tax-free withdrawal, and how the account can sit alongside the RRSP Home Buyers' Plan. It is general information, and a lawyer or accountant can confirm how the rules apply to you.

Who can open an FHSA

To open an FHSA you must be a resident of Canada, at least 18 (19 where that is the age of majority), and 71 or younger on December 31 of the year you open it. You must also be a first-time home buyer, which means you have not lived in a qualifying home that you owned or jointly owned as your principal residence in the current calendar year or the previous 4 calendar years.

If you have a spouse or common-law partner, there is an extra condition. You also must not have lived, in that same window, in a home your spouse or common-law partner owned or jointly owned as your principal residence. That condition does not apply if you have no spouse or partner.

• Resident of Canada
• At least 18 (19 where that is the age of majority) and 71 or younger on December 31 of the year you open the account
• No owned or jointly owned home lived in as your principal residence in the current year or previous 4 calendar years
• If you have a spouse or partner, no home they owned that you lived in as your principal residence in that window

How much you can contribute

Participation room is $8,000 in the year you open your first FHSA, and the lifetime limit is $40,000. Unused room may be usable the following year.

Because the exact carry-forward amount and your own room depend on your circumstances, check your figures with the CRA or an accountant before you contribute.

Making a tax-free qualifying withdrawal

A qualifying withdrawal is tax-free and does not have to be repaid. You must meet all of the following conditions:

• You are a first-time home buyer
• You have a written agreement to buy or build a qualifying home, with completion before October 1 of the year after the withdrawal
• You acquired the home no more than 30 days before withdrawing
• You are a Canadian resident
• You intend to occupy the home as your principal residence within one year
• You file Form RC725 with the issuer

If any condition is not met at the time of withdrawal, the amount is taxable and must be included in your income. Timing matters, so line up your agreement of purchase and sale, your closing date and your withdrawal paperwork before you take money out.

Using the FHSA with the Home Buyers' Plan

The FHSA and the RRSP Home Buyers' Plan can be used together for the same qualifying home, as long as you meet all the conditions at the time of each withdrawal. The Home Buyers' Plan withdrawal limit is currently $60,000.

HBP withdrawals must be repaid to your RRSP over time. Repayment is a separate topic with its own rules, so read a dedicated HBP guide before you rely on it in your budget.

A separate programme: the land transfer tax refund

Ontario's first-time homebuyer land transfer tax refund of up to $4,000 is a different programme from the FHSA, with its own test. The buyer must be at least 18, must never have owned an eligible home anywhere in the world, and must occupy the home as their principal residence within nine months. For agreements signed after November 14, 2016, the refund is limited to Canadian citizens and permanent residents, and a buyer who is neither at closing has 18 months after registration to become one and then apply. If your spouse owned an eligible home while married to or in a spousal relationship with you, neither of you qualifies for the refund. Qualifying for an FHSA does not automatically mean you qualify for the refund, or the other way around.

What to do next

• Confirm you meet the residency, age and first-time buyer tests before opening the account
• Check whether a spouse or partner's past home affects you
• Note your contribution room and plan deposits around it
• Before signing, make sure your closing date fits the withdrawal rules
• Keep Form RC725 and your agreement of purchase and sale together for the issuer
• Ask a lawyer or accountant to review your plan if your situation is not straightforward

Frequently asked questions