Definitions for FHSAs

An advantage is any benefit, or debt that is conditional on the existence of the FHSA, subject to certain exceptions for normal investment activities and conventional incentive programs.

An advantage also includes any benefit that is an increase in the total fair market value (FMV) of the property of the FHSA that is reasonably attributable to any one of the following:

• a transaction or an event (or a series) that would not have occurred in a normal commercial or investment context between arm’s length parties acting prudently, knowledgeably, and willingly, and one of the main purposes of which is to benefit from the tax-exempt status of the FHSA
• a payment received in substitution for a payment for services rendered by the FHSA holder (or non-arm's length person) or for a return on investment on non-registered property
• a swap transaction
• a specified non-qualified investment income that has not been paid from the FHSA within 90 days of the FHSA holder receiving a notice from CRA requiring removal

An advantage also includes a registered plan strip, or any benefit that is income or a capital gain that is reasonably attributable to one of the following:

• a prohibited investment
• an artificial diversion of an amount away from the FHSA

For more information on advantages, go to Income Tax Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs.

The maximum amount that you may deduct in respect of your FHSA contributions, which is calculated as the lesser of:

• • The total of all your annual FHSA limits for the year and each prior year
  • minus The total of all of your FHSA deductions for each prior year
• • $40,000
  • minus The total of all your FHSA deductions for each prior year
  • minus All amounts transferred from your RRSPs to your FHSAs for the year and each prior year
  • plus The total of all designated transfers from your FHSAs to your RRSPs for the year and each prior year

    If the result of this calculation is negative, use $0.

The maximum amount of FHSA contributions you made in the year that may be used as an FHSA deduction, subject to the lifetime FHSA limit. Your annual FHSA limits are used in the calculation of your allowable FHSA deduction for the year.

Your annual FHSA limit for the year is the least of paragraphs (a), (b), and (c):

Paragraph (a)

• All of your contributions to your FHSAs made in the year (except contributions you made after your first qualifying withdrawal)
• plus one of the following amounts:
  • $0 if you opened your first FHSA in the year, or
  • your amount from paragraph (a) for the previous year that exceeds your annual FHSA limit for the previous year
• minus all of your designated withdrawals from your FHSAs in the year

Paragraph (b)

• $8,000
• plus your FHSA carryforward for the year
• minus the result of the following A-B calculation

Where:

• A is:
  • all your RRSP to FHSA transfers for the year plus all previous years
  • minus all your designated transfers for the year plus all previous years
• B is the sum of all amounts, one for each previous year, determined as follows:
  • $0 if you opened your first FHSA in the year, or
  • the lesser of the following amounts:
    • The amount from A for the year minus the amount from B for the year
    • $8,000 plus your FHSA carryforward for the year

Paragraph (c)

• $0, if in a previous year: 
  • your maximum participation period ended, or 
  • the holder died

The individual who opened an RRSP with an issuer or the individual who opened a registered retirement income fund (RRIF) with a carrier. In certain circumstances, the surviving spouse or common-law partner of a deceased annuitant may become the successor annuitant of the plan or fund.

Refers to a relationship or a transaction between unrelated persons who act in their own separate interests. An arm's length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their own separate interests.

For more information on arm's length, go to Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length.

A person who is not your spouse with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. The person:

• has been living with you in a conjugal relationship and this current relationship has lasted at least 12 continuous months

  In this definition, "12 continuous months" includes any period that you were separated for less than 90 days because of a breakdown in the relationship.

• is the parent of your child by birth or adoption
• has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support

The amount of your excess FHSA amount that is either withdrawn from your FHSAs (designated withdrawal) or transferred from your FHSAs to your RRSPs or RRIFs (designated transfer) using Form RC727 Designate an Excess FHSA Amount as a Withdrawal from your FHSA or as a Transfer to your RRSP or RRIF.

• A designated amount cannot exceed your excess FHSA amount at the time of the designation.
•  

Designated withdrawal

The amount of your excess FHSA amount withdrawn from your FHSAs using the prescribed form.

Your designated withdrawal of the excess cannot be more than:

• The total amount contributed to your FHSAs
• minus Any amounts previously withdrawn as a designated withdrawal

Designated transfer

The amount of your excess FHSA amount transferred from your FHSAs to your RRSPs or RRIFs using the prescribed form.

Your designated transfer of the excess cannot be more than:

• The total amount transferred from your RRSPs to your FHSAs
• minus Any amounts previously transferred as a designated transfer

A direct transfer is a transfer completed directly between the financial institutions of the two plans or accounts involved. To complete a direct transfer, a transfer form must be filled out.

The amount of your contributions to your FHSAs and transfers from your RRSPs to your FHSAs that exceed your FHSA limits. You may have an excess FHSA amount if the total of your contributions and transfers to your FHSAs in a year are more than your FHSA participation room for that year.

Your excess FHSA amount at a particular time of the year is:

• plus Your excess FHSA amount at the end of the prior year
• +plus All your contributions to your FHSAs and transfers from your RRSPs to your FHSAs in the year, up to that time
• –minus All your designated amounts in the year, up to that time
• –minus All your taxable withdrawals from your FHSAs in the year, up to that time
• –minus All amounts deemed received by you on the cessation of your FHSAs in the year, up to that time
• –minus Your unused FHSA re-participation room at the end of the prior year
• –minus The lesser of:
  • • $8,000
    • + plus Your FHSA participation room carryforward for the year
  • • $40,000
    • –minus All of your contributions to your FHSAs and transfers from your RRSPs to your FHSAs for all prior years up to the end of the prior year
    • +plus All of your designated amounts for all prior years up to the end of the prior year
    • +plus The total of the following calculation for each prior year: the portion of your taxable withdrawals from your FHSAs or the amounts deemed received by you on the cessation of your FHSAs that would have reduced or eliminated your excess FHSA amount in the particular year
    • +plus Your total FHSA re-participation room used up to the end of the prior year
    • + plus Your excess FHSA amount at the end of the prior year

      *if the result of this calculation is negative, use $0

A period that begins when the FHSA holder dies and that ends at the end of the first calendar year that begins after the FHSA holder's death, or when the trust ceases to exist, if earlier. For example, if an FHSA holder dies on January 1, 2024, the exempt period could continue until December 31, 2025.

Generally considered to mean the highest price expressed in terms of money that can be obtained in an open and unrestricted market between informed and prudent parties, who are dealing at arm's length, and under no compulsion to buy or sell.

For more information on the valuation of securities of closely-held corporations, go to Information Circular IC89-3, Policy Statement on Business Equity Valuations.

This is the amount that you are permitted to carryforward for purposes of the calculation of your annual FHSA limits.

This is different from your FHSA participation room carryforward, which is the amount that you are permitted to carryforward for purposes of the calculation of your FHSA participation room and the calculation of any of your excess FHSA amounts.

Your FHSA carryforward for a particular year is the least of:

1. $8,000
2. The result of the following A-B calculation, where:
   • A is the amount determined under paragraph (b) of the annual FHSA limit definition for the previous year
   • B is the result of the amount determined under paragraph (a) of the annual FHSA limit definition for the previous year plus all contributions made to your FHSAs in the previous year after your first qualifying withdrawal
3. $0 if you opened your first FHSA in the year

The amount of your allowable FHSA deduction that you choose to deduct from your income for a tax year.

The individual who opened the FHSA with an issuer. In certain circumstances, the surviving spouse or common-law partner of a deceased FHSA holder may become the successor holder of the FHSA.

Generally, your FHSA participation room for the year is the maximum amount that you can contribute to your FHSAs or transfer from your registered retirement savings plans (RRSPs) to your FHSAs in the year without creating an excess FHSA amount.

Your FHSA participation room for the year is calculated as follows:

Your unused FHSA re-participation room at end of prior year

plus the lesser of:

• • $8,000
  • + plus Your FHSA participation room carryforward
  • – minus Your excess FHSA amount at the end of the prior year

  If the result of this calculation is negative, use $0.

• • $40,000
  • –minus All of your contributions to your FHSAs and transfers from your RRSPs to your FHSAs for all prior years up to the end of the prior year
  • +plus All of your designated amounts for all prior years up to the end of the prior year
  • +plus The total of the following calculation for each prior year: the portion of your taxable withdrawals from your FHSAs or the amounts deemed received by you on the cessation of your FHSAs that would have reduced or eliminated your excess FHSA amount in the particular year
  • +plus Your total FHSA re-participation room used up to the end of the prior year
  • +plus Your excess FHSA amount at the end of the prior year

    If the result of this calculation is negative, use $0.

This is the amount that you are permitted to carryforward for the purpose of your FHSA participation room and the calculation of your excess FHSA amounts.

For a particular year, your FHSA participation room carryforward is the least of:

• • $8,000
• • The amount calculated as follows:
  • $8,000
  • +plus Your FHSA participation room carryforward for the prior year
  • –minus Your excess FHSA amount at the end of the second prior year
  • –minus All your contributions to your FHSAs and transfers from your RRSP made to your FHSAs for the prior year
  • +plus All your designated amounts for the prior year
     
  • +plus The portion of your taxable withdrawals from your FHSAs or the amounts deemed received by you on the cessation of your FHSAs that reduced or eliminated your excess FHSA amount for the prior year

    If the result of this calculation is negative, use $0.

• $0 if your FHSA was opened in the current year.

Taxable withdrawals you made from your FHSAs or amounts deemed received by you on the cessation of your FHSAs that did not reduce or eliminate your excess FHSA amount in the year is referred to as your FHSA re-participation room. Your FHSA re-participation room increases your FHSA participation room.

A "first-time home buyer" for the purpose of opening an FHSA is different than a "first-time home buyer" for the purpose of making a qualifying withdrawal.

For purposes of opening an FHSA

You will be considered to be a first-time home buyer if you did not, at any time in the current calendar year before the account is opened or at any time in the preceding four calendar years, live in a qualifying home (or what would be a qualifying home if located in Canada) as your principal place of residence that either:

• you owned or jointly owned
• your spouse or common-law partner (at the time the account is opened) owned or jointly owned

For purposes of a qualifying withdrawal

You will be considered to be a first-time home buyer if you did not, at any time in the current calendar year before the withdrawal (except the 30 days immediately before the withdrawal) or at any time in the preceding four calendar years, live in a qualifying home (or what would be a qualifying home if located in Canada) as your principal place of residence that you owned or jointly owned.

An entity (such as a bank, credit union, trust, or insurance company) that is authorized to open an FHSA or RRSP on your behalf.

Generally, this is the most you can contribute to your FHSAs or transfer from your RRSPs to your FHSAs in your lifetime.

The lifetime FHSA limit = $40,000

Your maximum participation period begins when you open your first FHSA and ends on December 31st of the year in which the earliest of the following events occur:

• the 15th anniversary of opening your first FHSA
• you turn 71 years of age
• the year following your first qualifying withdrawal from your FHSAs

Generally refers to a relationship or transaction between persons who are related to each other.

However, a non-arm's length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances.

For more information on non-arm's length, go to Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s length.

Any property that is not a qualified investment for the FHSA set up as a trust.

For more information on non-qualified investments, go to Income Tax Folio S3-F10-C1, Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs.

 This is property to which the FHSA holder is closely connected, and includes any of the following:

• a debt of the FHSA holder
• a debt or share of, or an interest in, a corporation, trust, or partnership in which the FHSA holder has a significant interest (generally a 10% or greater interest, taking into account non-arm's length holdings)
• a debt or share of, or an interest in, a corporation, trust, or partnership with which the FHSA holder does not deal at arm's length

A prohibited investment does not include a mortgage loan that is insured by the Canada Mortgage and Housing Corporation or by an approved private insurer. It also does not include certain investment funds and certain widely held investments which reflect a low risk of self-dealing.

For more information on prohibited investments, go to Income Tax Folio S3–F10–C2, Prohibited Investment – RRSPs, RRIFs, RESPs, RDSPs, FHSAs and TFSAs.

Is limited to qualified investments which include money, guaranteed investment certificates (GICs), government and corporate bonds, mutual funds, securities listed on a designated stock exchange but not real property.

The Income Tax Act permits qualified donees to issue tax receipts for donations they receive from individuals or corporations. Some examples of qualified donees are registered charities, Canadian municipalities, registered Canadian amateur athletic associations, the United Nations or one of their agencies, or universities outside Canada that accept Canadian students.

An investment in properties (except real property), including money, guaranteed investment certificates, Canada savings bonds and provincial savings bonds, mutual funds, and most securities listed on a designated stock exchange. The types of investments that qualify for FHSAs are generally similar to those that qualify for RRSPs.

For more information on qualified investments, go to Income Tax Folio S3-F10-C1, Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs.

A housing unit located in Canada. This includes existing homes and those being constructed.

• Qualify: Option 1

  • single-family homes
  • semi-detached homes
  • townhouses
  • mobile homes
  • condominium units
  • apartments in duplexes, triplexes, fourplexes, or apartment buildings
  • a share in a co-operative housing corporation that entitles you to own and gives you an equity interest in a housing unit

• Does not qualify: Option 1

  • a share that only provides you with a right to tenancy in the housing unit

You are a qualifying individual if you meet all of the following requirements at the time the FHSA is opened:

• 18 years of age or older
• a resident of Canada
• a first-time home buyer for the purposes of opening an FHSA

An amount received out of your FHSA where all of the following conditions are met:

• you must fill out Form RC725, Request to Make a Qualifying Withdrawal from your FHSA and give it to your FHSA issuer
• you must be a first-time home buyer for purposes of making a qualifying withdrawal
• you must have a written agreement to buy or build a qualifying home with the acquisition or construction completion date of the qualifying home before October 1 of the year following the date of the withdrawal
• you must not have acquired the qualifying home more than 30 days before making the withdrawal
• you must be a resident of Canada from the time that you make your first qualifying withdrawal from one of your FHSAs until the earlier of the acquisition of the qualifying home, or the date of your death
• you must occupy or intend to occupy the qualifying home as your principal place of residence within one year after buying or building it

The amount of a reduction in the FMV of property of the FHSA, if the value is reduced as part of a transaction or event (or series) for which one of the main purposes is to enable the FHSA holder (or non-arm's length person) to obtain a benefit in respect of the property of the FHSA, or to obtain a benefit as a result of the reduction. Exceptions are provided for plan distributions that are included in income, or specifically excluded from income (such as a tax-deferred transfer between plans).

For more information on a registered plan strip, go to Income Tax Folio S3-F10-C3, Advantages – RRSP's, RESPs, RRIFs, RDSPs, FHSAs and TFSAs.

An arrangement between you and a carrier (an insurance company, a trust company or a bank) that the CRA registers. You can transfer property to your RRIF carrier from an RRSP, a pooled registered pension plan (PRPP), a registered pension plan (RPP), a specified pension plan (SPP), an FHSA, or from another RRIF, and the carrier makes annual payments to you.

For more information on RRIFs, go to Registered Retirement Income Fund (RRIF).

A retirement savings plan that you establish with an issuer, that the CRA registers, and to which you or your spouse or common-law partner contribute.

For more information on RRSPs, go to Registered Retirement Savings Plan (RRSP).

Related persons are not considered to deal with each other at arm’s length. Related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact). A corporation and another person or two corporations may also be related persons.

For more information on related persons, go to Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length.

Any income (excluding the dividend gross-up) or a capital gain that is reasonably attributable, directly or indirectly, to an amount that is taxable for any FHSA of the FHSA holder (for example, subsequent generation income earned on non-qualified investment income or on income from a business carried on by an FHSA).

A person to whom you are legally married.

In provinces or territories that permit the FHSA beneficiary designation, a successor FHSA holder is a spouse or common-law partner of the FHSA holder at the time of death, designated by the deceased as the successor FHSA holder of the FHSA in the FHSA contract or in the deceased FHSA holder’s will, who acquires all of the rights of the FHSA holder under the arrangement including the right to revoke any beneficiary designation. This spouse or common-law partner becomes the new FHSA holder of the FHSA.

An individual who is a spouse or common-law partner of the FHSA holder, immediately before the FHSA holder’s death.

This is any transfer of property between the FHSA and its FHSA holder (or non-arm's length person). Exceptions are provided for contributions to and distributions from the plan, purchase and sale transactions between an individual's two plans with the same tax attributes and transactions relating to insured mortgages.

For more information on swap transactions and applicable transitional rules, go to Income Tax Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs.

The amount of your FHSA contributions at the end of the year (including all prior year’s contributions) that you could not deduct or have chosen not to deduct. This amount is carried forward and can be claimed as a deduction up to your annual FHSA limit for the next year.

Your unused FHSA participation room at a particular time of the year is:

• plus Your FHSA participation room for the year
• –minus All new contributions to your FHSAs and transfers from your RRSPs to your FHSAs in the year, up to that time
• +plus All your designated amounts in the year, up to that time
• +plus All your taxable withdrawals from your FHSAs in the year, up to that time
• +plus All amounts deemed received by you on the cessation of your FHSAs in the year, up to that time

Generally, your RRSP deduction limit for the year minus the amount you deducted for RRSP, pooled registered pension plan (PRPP), and specified pension plan (SPP) contributions for that year.

• plus Your RRSP deduction limit for the year
• –minus The amount you deducted for RRSP, PRPP, and SPP contributions for that year
• =equals Unused RRSP deduction room