Let’s talk about the most important news this year in terms of Canadian housing: the First Home Savings Account. The FHSA is a new account that is now available starting from April 1, 2023.
What is the FHSA?
The FHSA is a tax-sheltered account created for Canadians to help save money for a downpayment on their first home. It’s almost like a TFSA, as the money you put in can be used for investing.
Once you’re ready to purchase your first home, you are able to withdraw the money tax-free! The FHSA has a maximum of $40,000 lifetime contribution limit and an annual $8,000 contribution limit.
Some Facts About the FHSA:
- You are eligible to open an FHSA if you’re a first-time home buyer between the age of 18 and 71.
- Contributions are tax-deductible, just like your RRSP. While withdrawals can be tax-free, just like your TFSA.
- You can invest your FHSA in stocks, bonds, mutual funds, ETFs, and GICs.
- You must purchase the home by October 1st of the year after the withdrawal if you want the withdrawal to qualify as tax-free.
- This account can be used with the RRSP Home Buyers’ Plan! The original draft of the legislation stated that you could only use one or the other, but the updated final version bypassed that statement.
For more information on the FHSA, watch our video here. To figure out your eligibility and how to open your FHSA, you can visit the CRA website.
