First Home Savings Account: 10 Things You Need To Know
By Power Properties
If you're a first-time home buyer looking for a tax-efficient way to save for your dream home, then you might want to consider opening a First Home Savings Account (FHSA). This registered plan is designed to help Canadians save for their first home by providing tax-free savings up to certain limits. In this blog post, we'll discuss the essential things you need to know about FHSA.
Eligibility:
To be eligible for FHSA, you must be 18 years of age or older, a Canadian resident and a first-time homebuyer.
Contributions:
The maximum annual contribution limit for an FHSA is $8,000, and the lifetime contribution limit is $40,000. Any contributions made to an FHSA are not tax-deductible.
Carryforwards:
You can carry forward your unused FHSA participation room at the end of the year, up to a maximum of $8,000, to use in the following year.
Withdrawals:
When you withdraw funds from your FHSA tax-free to buy your first home, you need to have a written agreement to buy or build the home. The acquisition or construction completion date must be prior to October 1st of the year following the date of withdrawal.
Unused Contributions:
If you don't use your FHSA contributions to buy your first home, you can transfer the funds to your Registered Retirement Savings Plan (RRSP) without any tax implications.
Eligible Homes:
To be eligible, the home must be located in Canada, and you must intend to use it as your principal residence within one year of buying or building it.
When to Close a FHSA:
Your maximum participation period ends on December 31 of the year in which the earliest of the following events occur:
The 15th anniversary of opening your first FHSA
You turn 71 years of age
The year following your first qualifying withdrawal.
Account Holders:
You are not permitted to participate directly in your spouse’s or common-law partner’s FHSA. Only the holder of the FHSA can claim the FHSA contributions as a tax deduction on their income tax and benefit return.
Investment Options:
The funds in a FHSA can be invested in a range of options such as savings deposits, stocks, ETFs and cash. More products will become available over time.
Non-Qualifying Withdrawals:
If you withdraw funds from an FHSA for non-qualifying purposes (ex. buying a car), you will have to include that amount as income on your next income tax and benefit return.
In conclusion, the First Home Savings Account is a great way for Canadians to save for their first home while taking advantage of tax benefits. As a prospective first-time homebuyer, you should consider opening an FHSA to help you save for your dream home. Just make sure you understand all the rules and regulations governing the FHSA to avoid any penalties or unnecessary tax implications.
If you're ready to take the next step in buying your first home, consider working with the Realtors at Power Properties. Our team of experienced professionals can guide you through the home-buying process and help you find your dream home. With our knowledge of the real estate market and our commitment to excellent customer service, we can make your first home-buying experience a positive and successful one. Contact us today to schedule a consultation and start your journey towards homeownership with Power Properties by your side.