What happens to my FHSA if I leave Canada? It’s a common question for Canadians planning an international move, especially for those who’ve started saving through a First Home Savings Account.
While the FHSA offers great tax advantages for homebuyers, things can get complicated if you leave the country.
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In this post, we’ll break down what happens to your FHSA when you become a non-resident, how it affects your investments and taxes, and what your options are moving forward.
A First Home Savings Account (FHSA) is a registered savings plan designed for first-time home buyers.
It allows you to save money tax-free—up to annual and lifetime contribution limits—for the purpose of buying or building a qualifying first home in Canada.
You can contribute up to $8,000 per year to your FHSA, with a lifetime maximum of $40,000.
If you don’t use the full $8,000 in a given year, the unused contribution room carries over to future years, but you can only carry forward up to $8,000 at a time.
Contributions to your FHSA are tax-deductible, reducing your taxable income for the year.
Any investment income earned within your FHSA such as interest, dividends, or capital gains, is not taxed, allowing your savings to grow more efficiently.
When you use the funds to purchase a qualifying first home, withdrawals from your FHSA are completely tax-free.
You can contribute up to $8,000 annually, with a lifetime limit of $40,000.
Unused contribution room can be carried forward to future years, up to a maximum of $8,000.
FHSAs can hold a variety of investments, including mutual funds, ETFs, stocks, and GICs, providing flexibility in how you grow your savings.
Unlike the Home Buyers’ Plan (HBP), which requires repayment of withdrawn RRSP funds, FHSA withdrawals for a qualifying home purchase do not need to be repaid.
You can transfer property from your FHSA to your RRSP or RRIF without triggering immediate tax consequences, provided it’s a direct transfer and you don’t have an excess FHSA amount.
You can use the FHSA alongside other savings plans like the RRSP and TFSA, maximizing your ability to save for a home.
Yes, you can technically withdraw from your FHSA anytime, but how and why you withdraw affects the tax treatment:
You can withdraw funds tax-free if all of the following are true:
If you don’t meet the conditions, your withdrawal will be taxed like regular income in the year you take it out, similar to withdrawing from an RRSP.
If you leave Canada and become a non-resident, your First Home Savings Account remains open, but the rules regarding contributions, withdrawals, and taxes change significantly.
To have a quick grasp of what will happen, let’s take a look at an example:
Annie is a Canadian resident who opens an FHSA and starts making contributions to it.
Later, she moves out of Canada and becomes a non-resident.
While Annie can no longer make tax-free contributions to her FHSA after leaving Canada, she can continue to hold the account.
However, the key benefit of making tax-free withdrawals is no longer available to her as a non-resident.
Your investments inside the FHSA can continue to grow tax-free even after you leave Canada, but with a few considerations:
If you move abroad and become a non-resident, you can still transfer the funds from your FHSA to an RRSP (Registered Retirement Savings Plan) or RRIF (Registered Retirement Income Fund), provided you have enough contribution room in your RRSP.
RRSP transfer: The transfer from your FHSA to your RRSP or RRIF is tax-free as long as it is a direct transfer.
Contribution room: You must have enough RRSP contribution room to accommodate the transfer. If you do not have sufficient RRSP room, you may face tax penalties or be unable to complete the transfer.
If you leave Canada and become a non-resident, the tax treatment of your FHSA may also depend on the tax laws of your new country of residence.
It’s important to check with a tax professional in your new country of residence to understand any potential tax liabilities.
If you don’t use the FHSA funds to purchase a home, you can transfer the savings to your RRSP or RRIF without affecting your contribution room, deferring taxes until withdrawal.
For Canadians who have moved abroad, the First Home Savings Account can still offer some value, but there are a few factors to consider.
Whether or not you should continue contributing to your FHSA or close it entirely depends on your financial situation and long-term goals.
This means that your stocks, bonds, or mutual funds will not be subject to Canadian taxes on any income or capital gains earned within the account while living abroad.
Since you can carry forward unused contribution room, you might consider keeping the account active if you plan to take advantage of it in the future.
Yes. But deciding whether to close or transfer your FHSA depends on your circumstances:
If you’re no longer living in Canada but want to keep the account active for future use, you may be able to transfer the FHSA balance to an RRSP or RRIF without facing immediate tax consequences.
However, this is only possible if you have contribution room available in those accounts.
If you do not plan to return to Canada or use the FHSA in the future, you may decide to close the account.
Be mindful that any contributions made after you become a non-resident may be subject to a penalty if they exceed the maximum allowed limit for non-residents.