Unlocking the Door to Homeownership: Understanding the First Home Savings Account
Introducing the First Home Savings Account, CRA’s latest tax-deductible account that can save you fortunes annually, while setting you up for the purchase of your first home.
Why should you invest in an FHSA account? What are its benefits?
- Contributing to a FHSA combines both the benefits of an RRSP and a TFSA by operating as a tax-deductible source while also not having to return withdrawals taken from the account.
- This will allow you to invest and earn money that will go toward the down payment of your first home.
How much can you contribute to your FHSA’s?
- The FHSA participation room for the year is the maximum amount that you can contribute to your FHSA or transfer from your RRSP and/or TFSA.
- RRSP: Registered Retirement Savings Plan
- TFSA: Tax-Free Savings Account
- The FHSA participation room in the year that you open your account = $8,000.00
- The lifetime FHSA limit = $40,000.00
Who is eligible?
- To be qualified you must meet all the requirements
- At least 18 years of age
- Not more than 71 years of age on December 31 of the year
- A resident of Canada
- A first-time home buyer
- You’re considered a First Time Home Buyer if you did not, at any time in the current calendar year before the account is opened or at any time in the preceding four calendar years, live in a qualifying home:
- You owned or jointly owned a residence in Canada
- Your spouse or common-law partner owned or jointly owned a residence
- You’re considered a First Time Home Buyer if you did not, at any time in the current calendar year before the account is opened or at any time in the preceding four calendar years, live in a qualifying home:
What happens to your FHSA if you don’t buy a home?
- The FHSA was designed for the purpose of purchasing a home, meaning that all other reasons of withdrawals may qualify towards taxable income.
- If you were to withdraw the money, you have the option of moving it into either a RRSP or a TFSA to ensure it remains as a tax-free deductible.
Contributions deadline
- Contributions to your FHSA(s) must be made before Dec. 31st to be deductible on that tax year
Frequently asked questions about the FHSA:
- What investments can go into an FHSA?
- All the same qualified investments that are eligible to be held in a TFSA can be held in a FHSA.
- Can you have an FHSA at the same time as a TFSA and a RRSP?
- The answer is Yes!
- You can hold all three accounts at the same time but each account has its own guidelines/rules that all account holders must follow.
- To ensure you follow these, contact us right away and we’ll clear any questions/doubts you may have.
- You can hold all three accounts at the same time but each account has its own guidelines/rules that all account holders must follow.
- The answer is Yes!
- How long can I have a FHSA for?
- You can have your FHSA open for 15 years OR by the end of the year you turn 71
- How does my FHSA carry forward?
- The FHSA has a unique carryforward rule that allows you to carry forward your remaining contribution balance onto the next year up to a balance of $8,000
- This means, if you contribute $6,000 in your first year, you can contribute $10,000.00 in the second year.
- The FHSA has a unique carryforward rule that allows you to carry forward your remaining contribution balance onto the next year up to a balance of $8,000
For all inquiries/questions regarding the First Home Savings Account, please call Senathi & Associates at (416) 479-0600 or email us at info@gtacpa.ca, and we’d be happy to answer any of your FHSA/tax-related questions!
To read more about the FHSA, please refer to the link below from the CRA official website.