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Uncovering The Tax-Free First Home Savings Account: A Comprehensive Guide – Part 2

The journey into the world of tax-efficient savings for your first home continues in this second instalment.

Join us as we navigate through the intricacies of this registered account, paving the way for a comprehensive understanding of how it shapes the landscape of saving for that monumental first home purchase.

FHSA Qualifying Withdrawals: Essential Conditions

First-Time Home Buyer:

Withdrawals require the account holder and their spouse to be first-time home buyers, emphasizing support for those genuinely entering the housing market.

Absence Of Previous Ownership:

The taxpayer must not have owned a home in the calendar year before withdrawal or the preceding four calendar years, aligning with FHSA’s focus on those with no recent homeownership history.

Written Agreement:

A written agreement for home purchase or construction must be in place before October 1 of the year following withdrawal, ensuring genuine intent for home acquisition.

Intention To Occupy:

The taxpayer must intend to occupy the qualifying home as their principal residence within one year after buying or building it, emphasizing FHSA’s goal of facilitating both purchase and occupancy.

Flexibility In Withdrawal:

FHSA allows flexibility in withdrawal structure, whether as a single withdrawal or a series, accommodating diverse financial needs.

Tax Consequences:

Non-qualifying withdrawals are included in the individual’s income, underscoring the importance of adhering to criteria for fully leveraging tax-free benefits.

FHSA Qualifying Home Criteria: Key Points


A qualifying home must be a housing unit located in Canada, emphasizing support for residence acquisition within the country.

Cooperative Housing Corporation Share:

Eligibility extends to shares in a cooperative housing corporation, qualifying if it entitles the individual to possess and have equity in a housing unit in Canada within the cooperative.

Compliance Verification:

Individuals using FHSA should verify that their chosen residence aligns with criteria for a qualifying home, ensuring tax-free withdrawal eligibility.

FHSA Transfers: Tax Implications & Strategies


Transfers from FHSA to RRSP/RRIF are tax-free, allowing strategic reallocation without affecting RRSP limits, though FHSA limits are not restored.

RRSP To FHSA Transfers:

Tax-free, subject to FHSA limits (annual & lifetime), non-deductible on tax return, and do not reinstate RRSP limits.

FHSA Expiry And Transfers:

Upon FHSA expiry, unused funds can be tax-free transferred to RRSP/RRIF, or withdrawn on a taxable basis.

FHSA Expiry: Closure & Transfer Options

Maximum Participation Period:

FHSA closes on the earliest of:
15th anniversary of FHSA opening.
Individual turning 71.
Qualifying withdrawal.

Transfer Options:

After closure, unused savings can be tax-free transferred to RRSP/RRIF, enabling strategic financial planning beyond the FHSA period.

Tax Implications:

Without transfer, unused savings withdrawal is taxable, emphasizing the need for thoughtful financial planning post-FHSA expiration.

FHSA & HBP Interaction: Maximizing Options

Simultaneous Withdrawals:

FHSA and Home Buyer’s Plan (HBP) withdrawals can be made concurrently for the same qualifying home purchase, offering flexibility tailored to individual financial circumstances.

Advantages Of FHSA:

FHSA has no withdrawal limit (unlike the $35,000 cap on HBP), making it a potentially more powerful tool for tax-free accumulation of funds for a home purchase.

Strategic Withdrawal Considerations:

Individuals can strategically choose between FHSA and HBP withdrawals based on financial goals and timelines. FHSA’s limitless potential and absence of repayment obligations provide flexibility in the homeownership journey.

Spousal Contributions & Attribution Rules: FHSA Dynamics

Prohibition On Spousal Contributions:

Unlike RRSPs, contributing to a spouse’s FHSA is not allowed, adhering to explicit FHSA regulations.

Exception – Attribution Rules:

Attribution rules don’t apply if one spouse provides funds to the other for contributing to their FHSA, offering flexibility in spousal financial planning.

Tax Planning & FHSA Considerations: Strategic Insights

Strategic Creation For Transfers:

For those maxing out RRSP contributions, creating an FHSA is strategic. After 15 years, funds can be seamlessly transferred to RRSP, expanding tax-efficient savings.

Fund Transfers For Down Payment:

Individuals near home purchase with low FHSA balances can tax-freely transfer funds from RRSP to FHSA, offering a tax-smart option without Home Buyer’s Plan repayment obligations.

Combining FHSA And HBP:

Leveraging both FHSA and HBP allows simultaneous withdrawals for a qualifying home purchase. FHSA’s limitless potential complements HBP’s capped withdrawal, providing flexibility for tailored financial goals.

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As we draw the curtains on this two-part exploration into the Tax-Free First Home Savings Account, we’ve uncovered a wealth of insights designed to empower first-time homebuyers on their financial journey.

For further guidance and personalized assistance, consider reaching out to WK Tax Services, your dedicated partner for all your tax and accounting needs. Best of luck on your journey toward the home of your dreams!