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What is the First Home Savings Account (FHSA)?
The FHSA is a registered savings plan that allows first-time home buyers to save for their first home tax-free. Once you open an account, you can contribute up to $8,000 per year, with a lifetime limit of $40,000, and enjoy tax benefits on both contributions and withdrawals. The contributions you make within the year, reduce your taxable income for that year potentially resulting in an increased tax refund. You can then add the tax refund to your savings to get you that much closer to purchasing your home. The FHSA is also an investment vehicle, allowing you to invest your saved funds to grow that money even faster. |
How Does the FHSA Work?
1. Open an Account: Any Canadian resident aged 18 or older can open an FHSA. You can do this at your financial institution where you have your bank accounts or you can contact me and I'll put you in touch with someone to help you with it.
2. Contributions: You can contribute up to $8,000 annually, and any unused contribution room can be carried forward. So if you open the account this year and put $6000 into it, next year you'll be able to contribute up to $10,000.
3. Tax Benefits: Contributions are tax-deductible, similar to an RRSP (Registered Retirement Savings Plan), and withdrawals for purchasing your first home are tax-free, like a TFSA (Tax-Free Savings Plan). You'll want to make sure you include your FHSA contribution amount when filing your income taxes to ensure you take advantage of the savings.
4. Investment Growth: Your savings can grow through investments, and any income earned is also tax-free when withdrawn for your first home purchase.
Who is the FHSA For?
The FHSA is designed for first-time home buyers who are Canadian residents. Whether you're just starting to save or looking to boost your existing savings, the FHSA offers a flexible and tax-efficient way to reach your homeownership goals.
What happens when I use my FHSA to buy a home?
You'll need to close down the account before the end of the following year after taking possession of the home.
What if I decide not to buy a home?
You can transfer the funds from your TFSA into your RRSP without penalty.
Although I'm not a Financial Planner, the First Homer Savings Account kinda seems like a no-brainer for first time buyers.
Contact me below if you'd like more information or you'd like to speak with someone about setting up your FHSA!
