Frequently Asked Questions – Tax-Free First Home Savings Account (FHSA)

The Tax-Free First Home Savings Account (FHSA) is a registered account that allows prospective first-time home buyers to save up to $40 000 on a tax-free basis.

FHSA contributions are tax deductible, just like contributions for a Registered Retirement Savings Plan (RRSP).

Like a Tax-Free Savings Account (TFSA), earnings on investments in an FHSA and withdrawals are non-taxable under either the federal or Québec tax system.

To open an FHSA, an individual must be a Canadian resident living in Québec and be at least 18 years of age and no older than 71.

The participant or his or her spouse must not have owned a home used as his or her principal place of residence during the year the account is opened, nor during the four previous calendar years.

The FHSA must be opened with the objective of purchasing a first home in Canada.

The FHSA will cease to exist after December 31 of the year in which the first of the following two events occurs:

• the FHSA reaches its 15th anniversary;
• the account holder reaches the age of 71.

Moreover, the FHSA will be closed at the end of the year following the year in which the FHSA holder makes a first withdrawal from the FHSA to purchase a first home.

In the event that one of the above situations occurs, any unused portion of the funds for the purchase of a first home will be:

• either transferred to a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund (RRIF) without affecting the RRSP contribution limit and without incurring taxes in the year of transfer;
• or withdrawn with tax.

No. Only individuals can take advantage of this type of investment aimed at encouraging the purchase of a first home.

The annual contribution limit is $8 000 for a maximum lifetime contribution of $40 000. If the maximum contributions are made each year, this amount will be reached after five years.

 No. The $8 000 annual contribution limit does not vary with interest income.

As with the Tax-Free Savings Account (TFSA), contributions in excess of the annual contribution limit are subject to a penalty of 1% per month for each month the excess remains in the account.

Yes. The FHSA contribution deadline is December 31 of each year. Unlike a Registered Retirement Savings Plan (RRSP), the FHSA does not provide you with an extension.

Up to $8 000 of unused contribution room in a given year can be carried forward to the next year. Unused contribution room begins to accumulate in the year the FHSA is opened.

• Example: An individual who contributes $5 000 to an FHSA in 2023 is allowed to contribute $11 000 in 2024 (that is, $8 000 plus the unused $3 000 from 2023).

No. Only the holder of an FHSA can claim deductions for contributions made to it. However, the government does provide an exception to the attribution rules, which means that you can lend money to your spouse to contribute to your FHSA without incurring the tax consequences of any income earned in the account. There is no direct tax benefit to the spouse for this loan.

Yes. It will be possible to use both the Home Buyers’ Plan (HBP) and the FHSA for the purchase of a qualifying first home.

Unlike the HBP, where the money withdrawn from the Registered Retirement Savings Plan (RRSP) must be repaid over a period of 15 years starting in the second year following the year in which you made the withdrawal under the HBP, no repayment is required under the FHSA.

Unlike the HBP, where you cannot withdraw more than $35 000 from your RRSP, there is no limit to the amount that can be withdrawn from the FHSA.

Choosing between an HBP or an FHSA or taking advantage of both plans depends on the participant’s strategy for their first home purchase project.

Yes. As with a Registered Retirement Savings Plan (RRSP), it is possible to hold an FHSA at more than one financial institution as long as the annual ($8 000) and lifetime ($40 000) contribution limits are respected. It is the taxpayer’s responsibility to ensure that they do not exceed their limit in any given year.

Amounts withdrawn are not taxable if they are used to purchase a first home that meets the eligibility criteria. Amounts withdrawn for any purpose other than the purchase of a first home will be considered a non-qualifying withdrawal and will be subject to tax. This withdrawal will not restore the annual ($8 000) or lifetime ($40 000) FHSA contribution limits. A qualifying withdrawal or series of qualifying withdrawals can be made for the purchase of a first home.

Withdrawals are non-taxable if the following conditions are met:

• The participant has entered into a written agreement to purchase or construct a qualifying home before October 1 of the year following the year of this withdrawal and intends to occupy the qualifying home as a principal place of residence within one year of its purchase or construction.
• The withdrawal is made in connection with the purchase of a first home.
• The withdrawal is made no later than 30 days after the acquisition of a qualifying home.
• The qualifying home is located in Canada.

The FHSA holder is eligible for the non-taxable withdrawal even if their spouse became a homeowner after the account was opened or if their new spouse is a homeowner.

All TFSAs must be closed by December 31 of the year following the year of the first qualifying withdrawal.

Yes. However, you will lose the tax benefits of the FHSA. Any amount withdrawn from the FHSA that does not meet the eligibility requirements must be included in the income of the year of withdrawal and will be subject to tax, unless it is transferred to your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF). In addition, these withdrawals do not restore the annual ($8 000) or lifetime ($40 000) contribution limits.

The features of the financial products must be respected for these withdrawals.

Interest can be compounded annually, paid annually or paid monthly. Interest paid annually or monthly will be deposited into the Flexi-Plus Savings account of the FHSA.

All Épargne Placements Québec products are eligible for the FHSA. To invest in an FHSA, go online and follow this path: Online transactions> Transactions> Purchases.
You can also make regular contributions to your FHSA by bank withdrawal.

If you are a new participant to Épargne Placements Québec, go to the New Participant section of our website.

If you are already a participant and wish to open an FHSA, go online by following this path: Online transactions> Transactions> Purchases

No. As with any other account opened with Épargne Placements Québec, there are no management or administration fees that affect the returns on your investments in an Épargne Placements Québec FHSA.

The FHSA contribution receipts are mailed in February for contributions made in the previous year. You can view them in the “Online transactions” section of our website to avoid postal delays. If you want to be notified as soon as the receipts are issued, activate the notification feature when transmitting tax slips in the “Notification” subsection of “Online transactions.”

Amounts in a spouse’s or common-law partner’s FHSA can be transferred without tax consequences to a surviving spouse’s FHSA. If the surviving spouse is not eligible for the FHSA, then the FHSA amount of the deceased may be transferred to the surviving spouse’s Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) or withdrawn on a taxable basis by the surviving spouse. Such a transfer would not affect the surviving spouse’s annual contribution limit. 

In other cases, the amounts held in the FHSA must be withdrawn and paid to the heirs.

To obtain additional information or the form to be completed in the case of a transfer after death, consult the Canada Revenue Agency website. Please return the corresponding completed form to Épargne Placements Québec by regular mail or online: Online transactions > Transmission of documents.

In the event of a divorce or relationship breakdown, amounts in a spouse’s or common-law partner’s FHSA can be transferred on a tax-free basis to an FHSA, Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) of the other person in settlement of rights arising out of the marriage or common-law relationship, or its breakdown, under the terms of a decree or written separation agreement dividing property between the participant and his or her former spouse or common-law partner. Such transfer will not affect the annual contribution limits of either person.

To obtain additional information or the form to be completed in the case of a transfer after a divorce or the break-up of a de facto union, consult the Canada Revenue Agency website. Please return the corresponding completed form to Épargne Placements Québec by regular mail or online: Online transactions > Transmission of documents.

You must not exceed the annual limit of $8 000. A penalty of 1% per month is applied in the event of an over-contribution on the highest excess amount in the month. Your FHSA excess amount can be reduced or eliminated by means of your new FHSA contribution rights starting on January 1 of the following year or by withdrawing the amounts from your FHSA.

To obtain additional information or the forms to be completed to indicate an excess amount in the FHSA, consult the Canada Revenue Agency website. Please return the corresponding completed form to Épargne Placements Québec by regular mail or online: Online transactions > Transmission of documents.

The 1.25% bonus is available on all bond contributions with a term of 3 years or more in your FHSA. This bonus is automatically added to the first year’s interest rate on eligible products, thus maximizing the return on your investment. To learn more about the bonus, visit our Promotions and Advantages page.

You can transfer a FHSA held at another financial institution to an Épargne Placements Québec FHSA by contacting an agent by telephone.The bonus will be applied to the first year’s interest rate of all products with a term of 3 years or more. To learn more about the FHSA bonus, visit our Promotions and Advantages page.