First Time Homebuyer Account
Hey there friends! Are you dreaming of buying your first home but finding it hard to save up for a down payment? Well, the government has some good news for you! It has launched a new program called the First Home Savings Account (FHSA), which can help you save more money while getting tax breaks.
So, what is FHSA exactly? It's a savings account designed specifically for first-time home buyers. You can save up to $8,000 a year (or $40,000 lifetime) in your FHSA, and the contributions you make are tax-deductible. That means you can save on your taxes while saving up for your dream home!
One of the best things about FHSA is that the funds you save do not need to be repaid. Also, even if you or your spouse/partner owned a home in the past, you can still use FHSA as long as you haven't owned a home in the last four years.
Now, let's talk about the fun part: how much money can you save with FHSA? For example, if you earn $80,000 a year and contribute the maximum amount of $8,000 to your FHSA, you could save up to $3,000 in taxes, depending on your province. That's a pretty sweet deal, right?
Good-to-know points:
Unlike the Home Buyers’ Plan (HBP), FHSA funds need not be repaid
Non-FTBs can still use one so long as they didn’t live in a home they or their spouse/partner owned in this or the prior four calendar years (i.e., after 2018)
You can carry over FHSA contribution room to the next year
Users have 15 years to apply FHSA funds to a home purchase
Those who don’t buy a home can transfer FHSA funds to an RRSP Non-“qualifying withdrawals” are added to your taxable income.
Unlike an RRSP, you can't deduct contributions made in the first 60 days of the year from your prior year’s income.
You can use both the FHSA and HBP to buy a qualifying home.
Two FHSAs can be used to buy a home if both buyers are first-timers. Here’s CRA's page with complete details.
So, here are some strategies and considerations to keep in mind. If you're planning to buy a home in the future, using FHSA before RRSP or TFSA is a no-brainer. If you're a parent who wants to help your kids buy a home, you can gift them $8,000 a year for their FHSA to grow their savings and enjoy tax deductions. Finally, you can even defer your FHSA deductions to a future year when you're in a higher tax bracket to save even more on taxes.
Overall, FHSA is a great way to save for your first home and get tax benefits at the same time. Check out the complete details on CRA's website and start saving for your dream home today!
And as always, if you have any questions - let’s chat!
