Open this account by December 31, 2023! If purchasing your first home is something that you are hoping to accomplish in the next 5 years, We highly recommend you open a First Home Savings Account (FHSA) before December 31st. This is VERY quick and easy to do with no added cost to you. Trust us, your future self will thank you!
Why is it important to open up an FHSA by the end of the year?
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Each calendar year you are allowed to contribute up to $8,000 towards your FHSA, however, if you do not contribute the entire $8,000 you can roll over the unused contribution room to the following year.
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For example, if you contribute $2,000 to your FHSA in 2023, you would be allowed to contribute $14,000 in 2024 (i.e., $8,000 plus the remaining $6,000 from 2023).
But I don’t have money to contribute between now and the end of the year...?
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Not to worry! If you simply open up an FHSA by the end of the year and put in as little as $50 into your account you will give yourself access to a whole extra year of contribution room which you can roll over into next year.
Common questions below:
So what is a FHSA?
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A program that allows first-time home buyers the ability to save $40,000 tax-free.
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An FHSA combines the features of a Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA).
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Like an RRSP, contributions would be tax-deductible and qualifying withdrawals to purchase a first home would be non-taxable, like a TFSA.
Am I eligible?
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18 years +
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Canadian Resident
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First time home buyer - see below
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Buying for principal residence
How does the FHSA work?
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You can open a First Home Savings Account (FHSA) and make tax-deductible contributions of up to $8,000 annually, to a lifetime maximum of $40,000.
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Your funds and any investment earnings can stay in the FHSA and grow tax-free with every contribution you make until you’re ready to buy your first home. As long as you use the funds for your qualifying first home, you won’t have to pay any taxes on your FHSA withdrawal(s).
Can I combine the FHSA with the HBP (RRSP Home Buyers Plan)?
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Yes: you can use both the HBP and FHSA to maximize your downpayment for your first home.
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Keep in mind that with a HBP withdrawal, you’ll have to repay any funds you withdraw from your RRSP. However, with the FHSA there is no repayment requirement for withdrawals.
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When you’re ready to buy, you will have access to up to $75,000 between the two accounts.
What investments can I hold in the account?
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The list of qualified investments for the FHSA is the same as it is for TFSAs. After you contribute to the account, you can choose to invest in publicly traded stocks, ETFs, bonds, etc.
What if I don't buy a house?
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If you decide not to buy a house, then you can transfer the money you've saved (and any investment income earned) directly to an RRSP or a RRIF.
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There is no penalty and no tax at the time of transfer. However, keep in mind that once in the RRSP or RRIF account, the money will then be taxable when you withdraw based on the rules of those account types.
If you have any questions regarding the FHSA please let us know. We are more than happy to help answer questions or set up a quick phone call to walk you through the process. You can connect with us here: https://www.glennandbrittany.com/contact/
*** The above screenshot mentions a qualifying home, what is that? A qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family, semi-detached, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings all qualify.
A share in a co-operative housing corporation also qualifies if it entitles you to possession and gives you an equity interest in a housing unit located in Canada.
Posted by Glenn Feldstein PREC on
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