CRA releases death-related FHSA forms

The Canada Revenue Agency published three new forms on Thursday related to the tax-free first home savings account (FHSA).

Two of the forms relate to the death of the account holder: RC722 – Transfer from an FHSA to an FHSA, RRSP or RRIF After the Death of the Holder and RC724 – Joint Designation for a Deemed Transfer or Distribution from an FHSA after the Death of the Holder.

RC722 is for a surviving spouse who wishes to directly transfer their deceased spouse’s FHSA to their own FHSA, RRSP or RRIF. RC724, meanwhile, is for situations where the FHSA pays out to the deceased holder’s estate and the surviving spouse is a beneficiary.

The third form, RC727 – Designate an Excess FHSA Amount as a Withdrawal from your FHSA or as a Transfer to your RRSP or RRIF, would be used to direct an overcontribution to the FHSA out of the account.

Nina Ioussoupova, a spokesperson for the CRA, told Advisor.ca by email that more forms will be available in time for people to file their 2023 taxes, and that an FHSA participation room calculator is slated to come out this fall.

A form to report tax payable on excess FHSA amounts, non-qualified, prohibited and advantages taxes — similar to an existing TFSA-related form — will be available in February, she said.

By the same date, taxpayers will also gain access to a form for requesting a waiver or cancellation of excess FHSA amounts.

Further, FHSA holders will receive “a consolidated T4FHSA tax slip which will include contributions, qualifying withdrawals, taxable withdrawals, income tax deducted and several other amounts,” Ioussoupova said. “The T4FHSA slip will also provide instructions to taxpayers on how to complete their income tax and benefit return for the year that they received a T4FHSA slip.”

Including today’s releases, the CRA has published seven of the forms financial providers need to administer the accounts — all but one after the April 1 launch of the account.

In July, the CRA released Form RC721 – Transfer from your FHSA to your FHSA, RRSP or RRIF and Form RC723  – Transfer from an FHSA to another FHSA, RRSP or RRIF on Breakdown of Marriage or Common-law Partnership.

Prior to that, the agency had released Form RC725 – Request to Make a Qualifying Withdrawal from your FHSA and Form RC720 – Transfer from your RRSP to your FHSA.

The FHSA, which has an annual contribution limit of $8,000 and a total contribution limit of $40,000, is currently available at seven financial institutions.

Questrade Inc. had its account ready for the April 1 launch, while Wealthsimple also recently began offering the option, including to the nearly 20,000 Canadians who were on their wait-list.

Royal Bank of Canada, which launched its program in April, said clients have opened “tens of thousands” of accounts since then, with just over a quarter of them already at the maximum annual amount.

The bank said that 56% of account holders are between 25 and 34 years old, 20% are 35 to 44, and 6% are over 45.

National Bank also has its FHSA offering up and running, while the remaining Big Six banks said theirs will be ready later this summer or into the fall.

Others institutions have stated they would introduce their accounts before the end of the year, once they have prepared back-office systems and received additional guidance from the CRA on administering the plans.

With files from Ian Bickis and Rudy Mezzetta

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.