Get to Know More About First Home Savings Account (FHSA)
Do you have any kids, family, or relatives who are currently renting and are struggling with a downpayment? Please forward this link so they can know more about the First Home Savings Account.
The good news is the government just launched a fun and strategic solution to help you build up their down payment.
Introducing the First Home Savings Account (FHSA)! It’s like a secret savings account for first-time buyers (FTBs) that lets you save up to $8,000 a year and up to $40,000 over their lifetime. And the best part? Contributions are tax-deductible so you can save some serious cash!
Plus, if you use their FHSA savings to buy a qualifying principal residence, you won’t have to pay taxes on the gains or withdrawals. It’s like a gift from the tax gods!
For example, if you earn $80,000 a year, deducting $8,000 from your taxes could save you anywhere from $2,200 to $3,000, depending on the province. That’s some serious savings!
Here are some good-to-know points that will help you make the most of this amazing opportunity:
- Unlike the Home Buyers’ Plan (HBP), you don’t have to repay the funds they withdraw from your FHSA.
- Even if you’re not a first-time buyer (FTB), you can still use the FHSA if you haven’t owned a home in the past four years.
- If you use only some of your FHSA contribution room in a year, you can carry it over to the following year.
- You have 15 years to apply your FHSA funds to a home purchase.
- You can transfer your FHSA funds to an RRSP if you don’t buy a home.
- Be careful about non-qualifying withdrawals as they will be added to your taxable income.
- Unlike an RRSP, you can’t deduct FHSA contributions made in the first 60 days of the year from your prior year’s income.
- You can use both the FHSA and HBP to buy a qualifying home.
- Two FHSAs can be used to buy a home if both buyers are first-timers.
Now, let’s talk about strategies and considerations to help you maximize your FHSA benefits:
- Use your FHSA before contributing to an RRSP or TFSA to take advantage of the extra tax benefits.
- If you’re a parent who wants to help your kids own a home, consider gifting them $8,000 a year for their FHSA. This will allow them to invest and grow their savings early on while enjoying a tax deduction.
- You can even defer (carry forward) your FHSA deductions to a future year when you’re in a higher tax bracket, saving you even more tax. The same strategy can be applied to your RRSPs.
Ready to make your homeownership dreams a reality? Click here to check out the CRA’s page for complete details on the FHSA and start saving now!