Saving for your first home just got a little easier. The First Home Savings Account (FHSA) offers a smart new way to save for your first home, on a tax-free basis.
What is the FHSA?
The FHSA combines the features of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). It works like an RRSP when contributing and acts like a TFSA when making withdrawals. This means contributions are tax- deductible while qualifying withdrawals are non- taxable.
As a type of registered plan, you can hold investments in it to help reach your goal of owning a home faster. There’s no minimum balance required to open an account and you can hold a wide range of investment products.
The best part is that any growth within the plan is tax- sheltered, and withdrawals are tax-free as long as the funds are used to purchase your first home. This means your money will have the opportunity to grow faster in an FHSA than it would in a traditional savings account.
Here’s how an FHSA can help you save for your first home
-You can contribute up to $8,000 annually and contributions are not tied to income
-Contribution room starts to accumulate as soon as you open an FHSA
-Carry forward any unused contribution room to the next year, up to a maximum of $8,000
- Your lifetime contribution limit is $40,000
- Any investment gains can also be used toward buying a home
-You can combine your FHSA funds with your Home Buyer’s Plan savings
To open an FHSA, you must be
- At least 18 years of age and no less than the age of majority in your province
-A Canadian resident (with a social insurance number)
-A first-time homebuyer, which means you or your spouse/common-law partner has not owned a home where you lived this year or at any time in the preceding four calendar years
How it works
- Open your FHSA and buy investments to hold in it n Contribute often to help your money grow faster,
tax-free
-Make a tax-free withdrawal at any time to purchase a qualifying home
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