New to Investing Series Part V: FHSAs

The First Home Savings Account (FHSA) is a financial tool available to Canadians designed to help individuals save for their first home. It combines features of both a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA), providing unique benefits for prospective first-time homebuyers.

How FHSAs Work

• Eligibility: To open an FHSA, you must be a Canadian resident, at least 18 years old, and a first-time homebuyer, meaning you have not owned a home in the current year or the previous four calendar years.

• Contributions: You can contribute up to $8,000 annually to your FHSA, with a lifetime contribution limit of $40,000. Unused contribution room can be carried forward to the following year, but only up to a maximum of $8,000 per year.

• Tax Benefits: Contributions to an FHSA are tax-deductible, similar to an RRSP. This means you can reduce your taxable income by the amount you contribute to the account.

• Withdrawals: Withdrawals made to purchase a first home are tax-free, similar to aTFSA. This allows your savings to grow tax-free and be withdrawn without tax implications when you're ready to buy a home.

• Investment Options: Like TFSAs and RRSPs, FHSAs can hold a variety of investments, including stocks, bonds, mutual funds, and GICs, allowing your savings to potentially grow over time.

  
  

Benefits of FHSAs

• Tax-Advantaged Growth: The FHSA allows your savings to grow tax-free, maximizing the potential growth of your contributions.

• Tax Deductibility: Contributions reduce your taxable income, providing immediate tax relief and potentially resulting in a tax refund.

• Flexibility in Savings: You can combine the FHSA with the Home Buyers' Plan (HBP), allowing for additional withdrawal options from your RRSP to purchase a home.

• Targeted Savings: The FHSA is specifically designed to help first-time homebuyers, providing a focused approach to saving for a down payment.

• Long-Term Planning: Even if you're not ready to buy a home immediately, starting an FHSA can help you plan and save effectively over time.

  
  

Overall, the FHSA is a valuable tool for Canadians looking to enter the housing market, offering significant tax advantages and a structured way to save for a first home purchase. Contact Tara Webber of BeOne Financial today to open yours!