If you’ve been dreaming of purchasing your first home, you know the prospect can feel at once exciting and daunting. One of the biggest barriers standing in the way of home ownership: saving enough for a down payment.
In an effort to help more Canadians enter the housing market, the Government of Canada introduced a new registered plan through its 2022 budget, called the Tax-Free, First Home Savings Account (FHSA). Through the new account, prospective home buyers can build their savings up to $40,000 tax-free for the purchase of their first home. The FHSA is packed with powerful benefits that can help you save faster than ever before.
Here’s a closer look at 10 commonly asked questions about the FHSA:
Great question. The FHSA is a registered plan designed to help first-time homeowners save for a down payment. It combines the very best features of a registered retirement savings plan (RRSP) and tax-free savings account (TFSA).
There are also certain duration requirements for the First Home Savings Account. Accounts can stay open:
Getting started is half the work. To open an FHSA, you must be:
Grow your savings, not your taxes. The First Home Savings Account offers four powerful incentives:
Now, we'll dig deeper into the fine print of contribution limits and deductions.
Let’s get down to the details. An account holder must meet certain conditions to withdraw money tax-free. You must:
Change happens. So, what do you do if your circumstances shift, and you no longer need to purchase or build a home?
You can transfer any savings from your FHSA into a RRSP or RRIF. This transfer is done on a tax-free basis. Your savings are only taxed when they are withdrawn and not used for a first home purchase.
By allowing you to save up to $40,000 (or up to $75,000 if combined with the Home Buyers’ Plan) tax-free and providing tax deductions, the FHSA can help you realize your home ownership dreams. As many Canadians grapple with climbing real estate prices, it’s certainly an investment tool that’s worth considering.
We’ve covered some of the most common questions about the FHSA in this piece. To learn more or check for updates, please visit the Tax-Free First Home Savings Account information page on the Government of Canada website.
In the meantime, start dreaming about your new home – with the FHSA, you’re one step closer to becoming a homeowner.
You are solely responsible for confirming that your FHSA, TFSA and RRSP contributions are within your allowable limits set by Canada Revenue Agency (CRA). All rules and contribution limits for FHSAs are set out by CRA and applicable legislation apply. Information about FHSAs is based on what is currently available from the Canadian government and may be subject to change.
Mutual funds, other securities and securities related financial planning services are offered through Qtrade Advisor, a division of Credential Qtrade Securities Inc. Financial planning services are available only from advisors who hold financial planning accreditation from applicable regulatory authorities. Mutual funds and related financial planning services are offered through Qtrade Asset Management (a tradename of Credential Asset Management Inc).