The FHSA, A Great New Tool for First-Time Home Buyers in Canada
When it comes to buying a home, securing enough funds for the down payment can seem like a tall order. Recognizing this challenge, the Canadian government has introduced the First Home Savings Account (FHSA) a registered investment account specifically designed to help first-time home purchasers achieve their homeownership aspirations.
This account is an incredible way to save for your first down payment! Upon registration for your FHSA, you receive $8,000 a year in contribution room (up to a maximum lifetime contribution of $40,000). It may not sound like much, but wait until you discover the additional benefits this account brings!
Pre-Tax Dollars & Tax-Free Growth
Your contribution of $8,000 to your FHSA is made with pre-tax dollars! This means that you can deduct your contributions from your taxable income, similar to an RRSP. Even better, any eligible investments within your FHSA also benefit from tax-free growth, much like a TFSA! In other words, it's like receiving free money from the government.
Combine your FHSA and HBP
The First Home Savings Account can also be combined with the Home Buyers' Plan (HBP) within your RRSP, covering both sides of the coin necessary to help first-time buyers succeed. However, unlike an RRSP, you don't have to pay back contributions to your FHSA after they are used.
When Should You Open an FHSA?
The eligibility criteria for opening an FHSA include being a first-time homebuyer over the age of majority in your respective province. If you are eligible but don't have the capital to invest in an FHSA at the moment, it's still worth exploring, as the contribution room starts accumulating once you open the account—that's opposed to a TFSA, which begins accumulating at age 18.
Conclusion
The First Home Savings Account is a fantastic opportunity for aspiring homeowners in Canada. With the ability to make pre-tax contributions, enjoy tax-free growth, and combine account capabilities with the HBP, FHSAs are designed to hasten homeownership dreams. Even if you don't have the immediate capital to invest, opening an FHSA can secure your future and help you take advantage of the contribution room early on. Don't wait—start saving for your first home today with the First Home Savings Account.
