By Matt Solberg on December 16, 2023.
First proposed as part of the 2022 Federal Budget, and now available through most major Financial Institutions. The First Home Savings Account, or FHSA is a new type of Registered account that combines some of the perks of existing Investment Accounts to help Canadians save towards their first home by allowing account holders to contribute, invest and save tax efficiently.
Similar to an RRSP, contributions can be claimed as a deduction against taxable income. Investments can then grow in the account tax free and ‘qualifying’ withdrawals to purchase a first home would be non-taxable, like a TFSA.
To be eligible to open an FHSA, a person must be a Canadian resident, 18 years or older and a ‘First Time Home Buyer’. Annual contributions are capped at $8,000, with a total lifetime contribution limit of $40,000 and unused contribution room can be carried forward into future years, starting from the year the account is opened.
When you go to withdraw the funds they must be used to purchase a ‘qualified home’ otherwise, funds could be transferred to an RRSP or RIFF on a tax-deferred basis, though, if funds are not rolled to an RRSP or RIFF and are withdrawn and not used to purchase a ‘qualified home’ the withdrawals would be taxed as income. A qualifying home would be a first home, with a written agreement to buy or build and you must intend on occupying the home as your principal residence within one year of buying or building.
This could be a great way to save towards the purchase of a first home, though there are a number of other regulations and features that should be discussed with a qualified Financial Planner to make sure it’s the right fit for you.
For more information please contact me @ 403-504-2780 or email me at email@example.com.
Matt Solberg, CFP, CIM, is an investment adviser and vice president with TD Wealth Private Investment Advice. Contact him at firstname.lastname@example.org or 403-504-2780