Key Features of the FHSA
Tax-Deductible Contributions: Contributions reduce your taxable income, similar to an RRSP.
Tax-Free Withdrawals: Funds used for purchasing a qualifying home are not taxed, like a TFSA.
Annual Contribution Limit: You can contribute up to $8,000 per year, with a lifetime maximum of $40,000.
Carry-Forward Contribution Room: If you don’t contribute the full $8,000 in a given year, you can carry forward the unused amount to the next year.
Who Can Open an FHSA?
You’re eligible if you meet the following criteria:
Age: Must be at least 18 years old
Residency: Must be a resident of Canada
First-Time Homebuyer: You, or your spouse/common-law partner, must not have owned a home in which you lived in the last four years
How Does the FHSA Work?
Open an FHSA: Set up an account through your bank, credit union, or financial institution.
Make Contributions: Deposit up to $8,000 annually (tax-deductible).
Grow Your Savings: Invest your FHSA funds in eligible investments like mutual funds, ETFs, or GICs to grow them tax-free.
Withdraw for a Qualifying Home: Use the funds to purchase your first home without paying taxes on the withdrawal.
How is the FHSA Different from an RRSP or TFSA?
RRSP: You can withdraw funds tax-free for a home purchase under the Home Buyers’ Plan (HBP), but the amount must be repaid over time. FHSA withdrawals do not need to be repaid.
TFSA: Contributions to a TFSA are not tax-deductible, but like an FHSA, withdrawals are tax-free.
Why This Matters
The FHSA provides a powerful way to save for your first home by combining the tax advantages of an RRSP and a TFSA. By leveraging this plan, you can reach your goal of homeownership faster and with significant tax savings.