Please read the beginning of the article here
The maximum participation period for an FHSA ends at the earliest of:
- 15 years after opening an FHSA;
- the end of the year following the year of the individual’s 70th birthday; and
- the end of the year following the year when the individual first makes a qualifying withdrawal from an FHSA.
Any funds remaining in the plan after the maximum participation period could be transferred tax-free into a RRIF or an RRSP withouteroding contribution room. Otherwise, the funds will have to be withdrawn on a taxable basis.
Timing of opening an FHSA
A June 28, 2023 Advisor’s Edge article (How to properly plan the opening of an FHSA, Charles-Antoine Gohier) discussed the impact of individuals purchasing homes later in lifeonFHSAplanning.
The article quoted a study from 2020 that estimated that the average age to buy a home in Canada is 36. If an individual opens an account at age 18, the plan must be closed no later than 15 years later, that is, when the individual is 33. If the individual contributes the annual maximum of $8,000 for the first five years to reach the maximum contribution of $40,000, assuming a 4.5% return, the balance of the FHSA would be $74,221 at the end of 15 years. If not used for a home, the individual must either withdraw the balance on a taxable basis or roll the balance into their RRSPon a tax-free basis. While rolling the FHSAinto the individual’s RRSP does not erode their RRSP contribution room, no tax-free withdrawal would be possible for subsequent use of the funds to purchase a first home. Up to $35,000 could be withdrawn from the RRSP under the home buyers’ plan, but this would be subject to repayment conditions. Where sufficient funds are available in the RRSP, the home buyers’ plan can be used in conjunction with a tax-free FHSA withdrawal.
Please read the third part of the article in our next post.
*The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this text accepts any contractual, tortious, or any other form of liability for its contents.
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