Are you dreaming of owning your first home in Canada? The First Home Savings Account (FHSA) could be your key to making that dream a reality. This registered savings plan allows potential first-time homebuyers to save up to $40,000, or $8,000 per year, towards their home purchase without worrying about accruing taxes. Similar to a Registered Retirement Savings Plan (RRSP), contributions made to an FHSA are tax- deductible on your income tax return for the tax year in which you make them.
What You Need to Know
Eligibility:
To open an FHSA, you need to be a resident of Canada, at least 18 years old, and not have owned property (such as a condo, duplex, or single-family unit) solely or jointly with a spouse or common-law partner within the last four years.
Contribution Limits:
The annual contribution limit for an FHSA is $8,000, and the lifetime contribution limit is $40,000. You can have more than one account, but these limits remain the same.
Excess Contributions:
Be cautious about exceeding the prescribed annual limit. Contributions over the limit will be taxed at 1% per month until they are eliminated.
Tax Benefits:
Contributions to your FHSA are tax-deductible for the tax year in which you make them, similar to RRSP contributions. However, unlike RRSPs, contributions made in the first 60 days of a calendar year cannot be claimed as income deductions for the prior tax year.
Withdrawals:
You can withdraw funds from your FHSA tax-free when it's time to purchase or build your first home. Any funds remaining can be transferred on a non- taxable basis to an RRSP or a Registered Retirement Income Fund (RRIF).
Duration:
The FHSA account remains active until one of three instances occurs: the account reaches 15 years of age, you reach the end of your 71st year, or you make a qualifying withdrawal for a first-home purchase.
Family Contributions:
While you cannot directly contribute to your child's FHSA, your child can contribute to their own FHSA using funds provided by you.
Home Buyers' Plan (HBP):
You can make both an FHSA withdrawal and a Home Buyers' Plan (HBP) withdrawal for the same qualifying home purchase. This means you may have a total of $75,000 (plus accumulated investment income from an FHSA) of tax-free money for your new home purchase if you've contributed the maximum lifetime amount of $40,000 to your FHSA and have sufficient funds in your RRSP.
The real estate market continues to be competitive and dynamic. Don't let lingering questions keep you from your dream home! Reach out today and let us help you navigate you through the homebuying process.
Thanks for reading today’s BLOG!!!
Brian Kondo
Sales Representative / Team Leader
The Brian Kondo Real Estate Team
Re/Max Hallmark First Group Realty Ltd.
905-683-7800 office
905-426-7484 direct
brian@briankondo.com
www.BrianKondo.com
www.BrianKondoTeam.com
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