The First Home Savings Account

The First Home Savings Account (FHSA) is an initiative aimed at helping first-time home buyers save for their first home. This account offers certain tax advantages, combining features of both a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). Here is a breakdown of how it works. Here are the key features of the FHSA:

Eligibility

• You must be a Canadian resident and at least 18 years old.
• You qualify as a first-time homebuyer if you have not owned a home in the current year or the previous four calendar years.

Contribution Limits

• The annual contribution limit is $8,000, with a lifetime limit of $40,000.
• You can carry forward any unused portion of your annual contribution up to a maximum of $8,000 annually.

Tax Deductibility:

• Like an RRSP, contributions to the FHSA are tax-deductible, reducing your taxable income for the year.

Tax-Free Withdrawals:

• As with a TFSA, withdrawals from the FHSA for purchasing a first home are tax-free.

Combining with RRSP Home Buyers' Plan:

• You can use the FHSA with the RRSP Home Buyer's Plan (HBP), which allows you to withdraw up to $35,000 from your RRSP for a first home purchase. The FHSA is an additional tool to boost savings further.

Unused Funds:

• If you don't purchase a home, the funds in your FHSA can be transferred to your RRSP or RRIF (Registered Retirement Income Fund) without tax consequences. Alternatively, you can withdraw the funds, but they will be taxed as income.

The FHSA is an excellent option for first-time homebuyers, offering tax savings and growth opportunities for contributions. If you would like to explore these points further, please get in touch with me to learn more about the FHSA.