First Home Savings Account (FHSA)
Save Tax-Free money and move closer to buying a home.
In 2023, JBF Financial will host the FHSA. Here’s what we know about the newly registered account that can get you closer to your dream house.
What is the FHSA?
The federal government introduced a new form of registered account called the First Home Savings Account (FHSA). An FHSA is a tax-advantaged savings account for people looking to purchase their first house. Contributions to an FHSA will be tax deductible in the same way as RRSP contributions are. As with a tax-free savings account (TFSA), withdrawals used to fund the purchase of an eligible house are exempt from taxation.
Why should I think about starting an FHSA?
- Gain tax benefits
You can lower your taxable income by contributing to an FHSA.
- Tax-free savings growth
Your FHSA’s investment earnings are tax-free as long as they remain in the account.
- Tax-free savings for your first house
When used towards purchasing a qualified house, withdrawals from an FHSA are tax-free.
What are the limits on my FHSA contributions and withdrawals?
Contribute frequently to your FHSA and see your savings increase. Canadian government guidelines for FHSA contributions and withdrawals are summarized here.
- $8,000 annual contribution limit
Any withdrawals from an RRSP will count toward your yearly quota. Unused amounts of your $8,000 annual contribution limit can be carried over to the following year.
- $40,000 lifetime contribution limit
Your FHSA funds must be used either within 15 years of account inception or before you reach 71, whichever comes first. After that point, you may take a taxed distribution or roll over your investments into an RRSP or RRIF.
- No limit for qualifying withdrawals
Withdrawals from your FHSA are tax-free if you use the money to buy a first or second property that meets specific requirements.