See if this new program could be part of your financial strategy!
What is a FHSA?
The FHSA is a tax-free savings account created by the federal government to encourage and facilitate first-time home buyers. Annual contributions to the account are capped at $8,000, with a lifetime contribution limit of $40,000. Furthermore, the account has a 15-year term from its opening date.
Admission criteria:
- You need to be a Canadian resident.
- You must be of legal age and under 71 years old.
- You must not have owned or co-owned a principal residence during the current calendar year prior to opening the account, or at any time during the previous four calendar year.
- You are ineligible if you or your spouse/common-law partner have occupied, as a principal residence, a dwelling owned by either of you during the current or four previous calendar years.
- You must not have previously used an FHSA to purchase a property.
Benefits of the First Home Savings Account (FHSA)
- Your contributions qualify for a tax deduction on your income tax and benefit return.
- Your savings grow tax-free.
- Withdrawals for the purchase of your first home are not taxable.
- If you want to use the funds for something other than buying a property, you can transfer them to an RRSP, RRIF, or TFSA without affecting your contribution limit or incurring penalties.
- Unused contribution room from one year can be carried forward to the following year up to a maximum of $8,000.
The FHSA (First Home Savings Account) VS the HBP (Home Buyers' Plan)
The Home Buyers' Plan (HBP) is a very attractive savings tool for first-time buyers. However, the FHSA offers a number of undeniable advantages for first-time homebuyers.
Home Buyers' Plan (HBP)
- Repayment is required within 15 years of withdrawal to avoid taxation on the withdrawn amounts.
- Maximum withdrawal amount of $35,000
- Maximum annual RRSP contributions
- Funds must be deposited into your RRSP at least 90 days prior to making a HBP withdrawal.
- Date limite de cotisation REER : 60 jours après la fin d’année
First home savings account (FHSA)
- No repayment required
- No withdrawal limit
- Maximum annual contributions of $8,000 and a total of $40,000 over a lifetime
- No minimum holding period to withdraw funds
- Contribution deadline: December 31 of each year
What happens to the FHSA after buying a home?
It must be closed within 12 months of withdrawal, as it can only be used once.
Is it possible to transfer RRSP amounts directly to the FHSA?
Yes, you can, without any tax consequences. However, you cannot recover the RRSP contribution room corresponding to the amount transferred, or obtain a new deduction.
The FHSA is a particularly advantageous solution for those who want to make their real estate dreams come true. This tax-free savings account does not replace the HBP; rather, it is a very attractive option that can be combined with an RRSP to create an optimal financial strategy.
