Saving for a home can be a hassle, especially during these times where inflation is at its all-time high. But not to worry, there is hope. The government of Canada has now introduced a new registered savings account called First Home Savings Account (FHSA) just for first time home buyers.
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What is a First Home Savings Account?
The First Home Savings Account (FHSA) is a tax-free savings account meant for home purchases. It’s a new registered plan that allows first-time homebuyers to contribute up to $8,000 per year, with a lifetime limit of $40,000. Simple as that.
Who is eligible to open a FHSA account?
To open this account, there are certain criteria which must be met, and they are:
- You must be a Canadian resident.
- You must be between the ages of majority in your province which is 18 years old and 71 to contribute.
- You must be a first-time home buyer.
A few things to note:
1. Some provinces have different age of majority such as
- 18 years old (Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island)
- 19 years old (British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, Yukon, Nunavut, Northwest Territories)
2. Being a “first time homebuyer” means that you and your current spouse or common-law partner must not have owned a home that you lived in as your principal place of residence, at any point during the portion of the calendar year before the account was opened and in the 4 preceding calendar years.
Why should you open a FHSA account?
By now, you must be thinking” How does this account benefit me?” Well, there are several reasons why you should consider getting a FHSA:
- FHSA contributions are tax deductible can reduce your taxable income.
- You can grow your savings tax-free-Any investment income in your FHSA is non-taxable while it’s in your plan. You are able to Invest in mutual funds, savings accounts, stocks, ETFs and more.
- You can save for your first home, tax-free-Pay no taxes on your withdrawals when you use your FHSA towards the purchase of a qualifying home.
So there you have it! even though interest rates are sky-high right now, you can start your saving for your first home today with the new First Home Saving Account. Just head down to your branch and mentioned that you would like to open a FHSA.
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