In our September 2023 newsletter, one of our articles talked about the new FHSA account, which was created to help people save for their first home.

By now, most of the major details are well-known:

  • You can contribute $8,000 a year to the FHSA
  • You can contribute $40,000 lifetime to the FHSA
  • Contributions are tax-deductible (like RRSP contributions)
  • Redemptions, if made to fund a home purchase, are tax-free and do not require any sort of repayment (unlike the RRSP’s Home Buyers Plan program, where you repay your redemption amount over 15 years)
  • FHSA balances not used to purchase a home can be transferred to an RRSP tax-free

These features make the FHSA a top-priority savings vehicle for non-homeowners to save for either a home purchase or retirement.

However, there is one small detail relating to the accumulation of FHSA contribution space. Unlike RRSP space (which accrues each year based on your prior-year income) or TFSA space (which accrues every new calendar year), FHSA space only starts building once you’ve opened your first FHSA.

For instance, if you opened your first FHSA in 2023, your lifetime current contribution space is now $16,000 (2023 plus 2024 amounts). However, if you open your first FHSA in 2024, your lifetime current space is only $8,000.

There’s an easy solution for this. If you intend to make use of the FHSA, then open one as soon as possible, if it’s only with a $25 initial purchase. All that is required to accrue ongoing space is to have opened an FHSA.

If you think an FHSA might be an account that makes sense for you, please contact us. We can discuss your situation and make an appropriate recommendation.