The new First Home Savings Account (FHSA) has been introduced to try and help Canadians save for a down payment on their first home. Below is some introductory information regarding the FHSA. Appreciating that everyone’s situation is unique, as well as the complexities involved in this and other similar programs, professional tax advice is recommended.
The FHSA does not accumulate contribution room for 2023 if they are not opened by December 31st. Unlike the TFSA, FHSA accounts will not allow for contribution room to accumulate if the account is not open.
Why consider an FHSA:
- Individuals have a lifetime contribution limit of $40,000 for a first home purchase subject to an annual contribution limit of $8,000.
- Carry forward unused contribution room up to a maximum of $8,000 from the prior years for as long as the account is open.
- Reduce an individual’s tax bill and carry forward undeducted contributions.
- Pay no taxes on any investment earnings or withdrawals used to purchase a qualifying home.
- Complements the Home Buyers’ Plan (HBP), which can provide individuals with an additional $35,000 for a qualifying first home purchase per individual.
Also worth noting:
- If you end up not using any FHSA money, it can be transferred tax free to an RRSP or RRIF.
- An FHSA can hold the same range of investments as a TFSA and RRSP.
- Individuals who haven’t lived in a qualifying home as their principal residence in the calendar year before the account is opened, or at any time in the preceding 4 calendar years are eligible to open an FHSA.
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