If you’re in a relationship and living with someone who owns their home and you want to open a First Home Savings Account for yourself, you’re out of luck. The rules don’t allow for that.
But what if you already have an FHSA, live with a homeowner partner and want to use one to purchase a home together in the future? It turns out the government has made allowances specifically so that people in this situation can still use the funds for a home purchase.
An FHSA is a tax-sheltered savings account launched in 2023 that combines the income-tax-deduction benefits of a registered retirement savings plan (RRSP) and the same tax-free withdrawals that come with a tax-free savings account (TFSA). Money from the account can only be used for a qualifying first home purchase, or it can be rolled into an RRSP.
Account holders get $8,000 in yearly contribution room, which starts accumulating from the date an account is opened. The maximum contribution room is $40,000. The tax rebates from contributing this much could amount to thousands of dollars, not to mention the tax-free capital gains.
Wilmot George, managing director of tax and estate planning at Canada Life, says there’s a subtle difference between the rules for opening an FHSA and withdrawing from one that allow some people with a home-owning spouse to still take advantage of the account’s benefits.
To put it simply, someone who lives in a home that they or their spouse owns doesn’t meet the requirements to start an FHSA. But if they already opened an account before they got into their relationship, they can still contribute to it and withdraw from it for a first home purchase that they’re part of. That includes a home that they buy with their spouse, even if their spouse is not a first-time buyer.
The distinction between qualifying for starting an account and withdrawing from one was not widely understood at first, Mr. George said. Some advisers believed that an FHSA holder with a home-owning spouse could not be allowed to use the funds for a purchase and would only be able to transfer their funds to an RRSP.
“It’s a new plan, and any time you have a new plan, it takes some time for Canadians to fully understand the rules around it,” Mr. George said.
“There’s certainly an opportunity here and flexibility built into the legislation.”
Marie-France Faucher, spokesperson with the Ministry of Finance, said in an e-mail that the rules were a deliberate measure “to not penalize a first-time home buyer who became married or a common-law partner after opening their FHSA.”
It’s another reason why any Canadian with aspirations to own a home should consider opening an FHSA, even if they don’t necessarily have the capacity to contribute to one yet.
Opening one ensures that you can use an FHSA even if you get into a relationship with a homeowner, and it also ensures that your contribution room grows so you can maximize your tax benefits before the purchase of a home.
The one caveat is that FHSA funds must be used within 15 years of the account being opened. If the money isn’t used by then, it must be rolled into your RRSP, although it won’t affect your RRSP’s contribution room.
Editor’s note: (May 15, 2025): This article has been updated to correct the name of Wilmot George, managing director of tax and estate planning at Canada Life.
