All first-time homebuyers take note: we want to tell you about the First Home Savings Account (FHSA) again because it’s a great way to save money for your first home.
But what exactly is it?
The FHSA is a special savings account created by the government to help people who want to buy their first home. You can put up to $40,000 into this account and you won’t have to pay any taxes on the money you save.
Now, let’s answer some of the top questions about the FHSA:
What is the FHSA?
The FHSA is a type of savings account designed to help Canadians buy their first home. It can be used for different types of homes in Canada, like single-family houses, condos, and apartments.
Do I qualify for the FHSA?
To qualify, you need to be a Canadian resident, at least 18 years old (or the age of majority in your province), and a first-time homebuyer. A first-time homebuyer is someone who hasn’t owned a qualifying home in the last four years.
How much money can I put into an FHSA?
You can add up to $8,000 each year to your FHSA, or transfer money from your retirement savings plan (RRSP). The most you can put in over your lifetime is $40,000. If you don’t use up your yearly limit, you can save it for the next year. But remember, you can’t put in more than $16,000 in one year.
What are the advantages of an FHSA?
There are three big benefits:
- Tax Deduction: When you put money into your FHSA, you can get a tax deduction. This means you might pay less income tax. For example, if you contribute $8,000 and your tax rate is 25%, you could save $2,000 in taxes.
- Tax-Free Growth: Any money you invest in your FHSA can grow without being taxed. This includes things like stocks, bonds, and mutual funds.
- Tax-Free Withdrawals: When you’re ready to buy your first home, you can take the money out of your FHSA without paying any taxes on it.
Can I use both a FHSA and RRSP Home Buyer’s Plan Together?
Yes, you can use both. You can take money from your RRSP under the Home Buyer’s Plan (HBP) and from your FHSA. The FHSA money is tax-deductible when you put it in, and it’s tax-free when you take it out for your first home. Just remember that if you use your RRSP for anything other than the HBP, it might be taxed.
What if I change my mind and don’t buy a home?
You can keep your FHSA for up to 15 years or until you turn 71, whichever comes first. If you don’t use it to buy a home, you have two options:
- Transfer: You can move the money to your RRSP or a Registered Retirement Income Fund (RRIF) without paying taxes.
- Withdraw: You can take the money out, but you’ll have to pay taxes on it.
So, with all that being said, the FHSA is a helpful way to save for your first home while enjoying some tax benefits along the way. And in this housing market, any extra help you can get as a first-time home buyer is warmly welcomed.
Are You Ready to Buy Your First Home?
Speak with our team today to see where you’re at when it comes to being prepared for that first home purchase. Whether you’re ready to get pre-approved or you’re just starting on your journey to home ownership, the team at Buckley Mortgage Broker is here to give you all the support and education you need to make the right choices for your specific situation.
Reach out and speak with us today to get started!
