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When is the FHSA Contribution Deadline?

Written by The Inspired Investor team  | Published on November 22, 2023

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As we approach the end of the year, there’s a new deadline to keep in mind for your tax and investment planning: FHSA contributions. The First Home Savings Account (FHSA) is new this year (2023) and offers another great opportunity for Canadians to save and invest with tax advantages.

 

The deadline

The annual contribution period for the FHSA is January 1st to December 31st. This means that you must contribute before December 31st to have your contribution amount deducted from your taxable income for 2023. Note that this is different from the deadline for your Registered Retirement Savings Plan (RRSP). Unlike RRSPs, any contributions you make to an FHSA in the first 60 days of the year can’t be deducted from the previous year’s income.

Get to know the FHSA

Now that the deadline is on your radar, let’s review the basics of the account. Launched in April 2023, the newest registered plan is designed to help more people get into the housing market. It allows eligible Canadian investors to deposit up to $40,000 over a 15-year period. From a tax perspective, it combines the advantages of two existing registered plans — the registered retirement savings plan (RRSP) and the tax-free savings account (TFSA). Like an RRSP, contributions to an FHSA can be used to reduce your taxable income. Like a TFSA, if you are making a qualifying withdrawal, you won’t pay tax on that withdrawal (including the principal amount and any potential investment growth).

You can contribute up to $8,000 per year to an FHSA, up to a lifetime maximum of $40,000. Unused room can be carried over to the next year (to a maximum of $8,000). Remember, the carry-forward amounts start accumulating only after you open the account. You can open multiple FHSAs, but the annual and lifetime contribution limits apply to the combined accounts, so be careful with your contributions. There is a one-per-cent tax applied to over-contributions for each month the excess amount stays in the account.

Despite the word “savings” in the name, it’s important to remember that the FHSA is an investment account. In general, you can hold much the same types of investments as you can in an RRSP or TFSA. Find out more in What Can Investments Can I Hold in My FHSA?

You have 15 years to save within an FHSA. If you decide not to buy a home during that time, you can transfer the money you’ve saved (and any investment income earned) directly to an RRSP or a RRIF without penalty or tax at the time of transfer. Keep in mind that funds transferred from an FHSA to an RRSP or RRIF account may be taxable when withdrawn.

To get more details about the benefits of the FHSA, read 9 Questions Answered About the New First Home Savings Account or watch the video below.

Ready to open an FHSA? Start here. RBC Direct Investing clients can also log in and choose "Open a new account" under your Profile icon. 

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The information provided in this article is for general purposes only and does not constitute personal financial or tax advice. Please consult with your own professional advisor to discuss your specific financial and tax needs.

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