Transfers out of an FHSA

You’re able to freely transfer cash and investments between two (or more) FHSAs held by the same individual without any immediate tax consequences.

This is as long as it’s a direct transfer, and not withdrawn then re-contributed back into the FHSA.

If you make a direct transfer between your FHSAs, this will not reduce your unused FHSA contribution room.

In most cases, you’re able to transfer cash or investments from your FHSA to your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) without any immediate tax consequences.

This is as long as it’s a direct transfer, (not withdrawn, then re-contributed) and you do not have an excess FHSA amount (over-contribution).

Please keep the following points in mind if you choose to transfer from an FHSA to an RRSP/RRIF:

• Transfers from FHSAs to RRSPs or RRIFs will not reduce your unused RRSP deduction room.
• Transfers from FHSAs to RRSPs or RRIFs are not tax deductible.
• Transfers from FHSAs to RRSPs/RRIFs will not restore your FHSA contribution room.
• Transfers must be made directly from the RRSP, not withdrawn and re-contributed.

After the cash or investments have been transferred to the RRSP/RRIF, normal withdrawal rules and taxes apply. If you choose to withdraw in the future, please explore the following articles for more information:

• Learn more about RRSP withdrawals
• Learn more about RRIF withdrawals
• Learn about converting your RRSP to a RRIF

If you decide to transfer cash or investments out of your FHSA to a Tax Free Savings Account (TFSA) or non-registered Margin account, this will be treated the same way as a non-qualifying withdrawal and may have tax implications.

If you transfer into a TFSA, you will also need to ensure that you have enough TFSA contribution room available.

Explore this article for more information on FHSA withdrawals.

The gross amount of the transfer will be reported as income for the tax year it is withdrawn in, and you will also be charged a withholding tax on the amount (similar to an RRSP).

Please note that this withholding tax may or may not completely cover any potential future taxes, this depends on your total overall income and other factors like deductions, credits, and etc. Please speak with your accountant or tax provider for tax advice for your personal tax situation.

Please check with a tax professional about your specific circumstances, or if you have any questions about the tax implications of a non-qualifying FHSA transfer.

Review the chart below to determine how the gross amount of your transfer will be taxed:

Withholding Tax Thresholds

Withholding taxes for Quebec residents include both the CRA and Revenu Quebec withholding amounts combined.

¹Represents the CRA withholding amount. ²Represents the Revenu Quebec withholding amount.

For USD transfers: USD transfers are represented as the CAD equivalent to determine which ‘tier’ of withholding tax is applied.

You can make a request to transfer cash out of your FHSA in either CAD or USD at any time by logging in, heading to the Move Money > Transfer page, and clicking on Transfer funds.

Please explore the sections in the article above to learn more about any potential tax implications of transferring cash out of your FHSA. This will depend on the specific account type you’re transferring to, and whether the transfer is considered taxable income.

Some accounts also may have tax implications for incoming transfers. Please explore the articles in this lesson for more information about transferring between different types of accounts.

If the transfer is considered taxable income, withholding taxes will apply to the gross amount of the transfer requested.

Note: USD transfers will be reported in the CAD-equivalent if the transfer results in a taxable event.

Learn more about how to request a cash transfer between Questrade accounts in this article.

You can request to transfer your investments out of your FHSA by logging in, heading to the Move Money > Transfer page, and clicking on Transfer investments.

Please explore the sections in the article above to learn more about any potential tax implications of transferring investments out of your FHSA. This will depend on the specific account type you’re transferring to, and whether the transfer is considered taxable income.

If the transfer is considered a taxable event, you will also be charged withholding taxes on the gross amount of the fair market value of the investments. This is charged to the cash balance in your FHSA.

Because Questrade does not sell your investments during this type of request, you are required to have the cash balance available in your FHSA account to cover the withholding tax.

When you transfer investments out of an FHSA, you have a few choices as to which market value is represented, depending on the type of investment. This will affect what price we are using, and how much withholding taxes will be applied. Please ask your accountant or tax provider to assist you in choosing which available price is best for your personal tax situation.

If withholding taxes do not apply, such as for an FHSA to FHSA transfer, or an FHSA to RRSP transfer, you can skip this section.

To indicate which price you’d like Questrade to use for determining your transfer amount, you can leave a comment on the request after it has been placed. You can leave comments by going to the Move money history section and selecting the transfer you want to update.

Let’s see an example

You request to transfer 50 shares of an American stock out of your FHSA into a Margin account. On the date of the request the stock’s closing price is $100, and you choose to use the closing price to represent the net market value of $5,000 USD.

Because withholding taxes apply to the gross amount of a transfer, this net amount must be “grossed up” so that you can receive the full net amount you requested.

When the transfer takes place, you need to have the cash available for the withholding taxes in the FHSA account the shares are originating from. The withholding tax is paid in the currency of the request, however if you don’t have the available cash in the currency of transfer, we can convert on your behalf.

The net amount of $5,000 USD falls into the 20% withholding tier (for a non-Quebec resident), therefore the gross withdrawal amount equals ($5000 / 0.8) = $6,250.

Therefore, the amount of cash necessary in the FHSA to cover the withholding taxes would be the difference between the gross and the net at $1,250 USD (or the CAD-equivalent).

After the shares have transferred, they will be shown in the Margin account with a new adjusted cost basis that equals the market value of the investment, not your original purchase price.

Because the gross amount of $6,250 USD was not a qualifying withdrawal from the FHSA, this will be added to your total income for the tax year it is transferred in. This is represented in the CAD-equivalent on your relevant tax slips for reporting purposes.

Please note that this withholding tax may or may not completely cover any potential future taxes arising from the income inclusion; this depends on your total overall level of taxable income and other factors like deductions, credits, and etc.

Please check with a tax professional about your specific circumstances, or if you have any questions about the tax implications of a non-qualifying FHSA transfer.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.