Can I still use my FHSA after my spouse bought a condo?

In CRA’s words, you are considered 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

Here are the CRA qualifications to use the funds for a home purchase: 

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. 

Read closely

Did you spot the difference between the two definitions, opening and withdrawing? When withdrawing from the account to purchase a home, there is no mention of a spouse in the definition. It matters if your spouse owns a home when opening an account but not when you are purchasing a new home. 

The other differing clause in the definition is “except the 30 days immediately before the withdrawal.” This is important. You must withdraw money from your FHSA within 30 days of closing; otherwise, it will no longer be a qualified withdrawal and will be taxed if withdrawn. I know, you’re thinking you will use the money for the down payment, so it won’t be an issue. Perhaps, but what if you have other money for the down payment and you intend to use the FHSA for furnishings or renovations? The 30 days may quickly slip by before you get around to withdrawing the funds.  

Again, you are good to continue contributing to your FHSA and then use the funds to purchase your first home even though you are living with your wife in the home she owns.  

Other FHSA rules worth noting

You made a really good decision to use the FHSA to save for a home. It is one of the best, if not the best, accounts available to anyone who qualifies and plans to purchase a home sometime in the next 15 years. When used as intended, you get a tax deduction on the money you contribute, just like a registered retirement savings plan (RRSP) contribution. Then, when you draw money to purchase a home, your money comes out tax-free, just like a tax-free savings account (TFSA). It’s the best of both worlds—you never pay tax on that money, coming or going! 

You can add $8,000 per year to a FHSA to a maximum contribution limit of $40,000. The tax deduction doesn’t have to be claimed in the year you make the contribution and can be saved for future years when you have a higher income. When you claim and receive the tax refund, do your best to save it. It can be added to an RRSP, allowing you to use the RRSP Home Buyers Plan, or to a TFSA. 

It is important to note that you can catch up past FHSA contribution room, but only back to the year you opened the account. This is different from a TFSA, where you can go back as far as when you were age 18 or the TFSA inception date (2009), whichever is sooner.

When catching up, the most you can add to a FHSA in any given year is $16,000, meaning you can only catch up one year at a time. For anyone about to purchase a home without an FHSA and extra cash, consider borrowing $8,000 to open a FHSA. You can claim the $8,000 as a tax deduction and use the tax savings to purchase an appliance or two. For someone in a 30% tax bracket, you would benefit from about $2,400 in tax savings. Once your home closes, withdraw the $8,000 and pay off the loan and you will have paid very little interest.

The FHSA escape clause

If it turns out you never purchase a home or can’t make a qualifying withdrawal, you can transfer your FHSA funds to an RRSP. You won’t get a tax deduction because you got that when you contributed to the FHSA. What you do get, though, is an extra $40,000 of RRSP contribution room. 

This was a good question, Shelly. The FHSA is a good, seemingly straightforward account—but you do have to be to be onside with the definitions.

Read more about buying real estate:

About Allan Norman, MSc, CFP, CIM

With over 30 years as a financial planner, Allan is an associate portfolio manager at Aligned Capital Partners Inc., where he helps Canadians maintain their lifestyles, without fear of running out of money.