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Open a Canadian First Home Savings Account (FHSA) and make saving to buy your first house easier! Reduce your taxable income while you save and get tax-free investment growth.
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A First Home Savings Account (FHSA) is a registered savings plan designed to help eligible first-time home buyers save for a home in a tax-efficient way. It combines some of the best features of an RRSP and a TFSA, meaning eligible contributions are generally tax-deductible, while qualifying withdrawals, including investment growth, can be taken out tax-free to purchase a first home. This makes the FHSA a powerful way to build savings faster while working toward home ownership.
If you are at least 18 years or older, a Canadian resident, have a valid SIN, and you or your spouse have not owned and lived in a home in the current year or during the previous four calendar years, you may be eligible to open an FHSA. You can contribute up to $8,000 per year, with a lifetime contribution limit of $40,000, and unused contribution room can be carried forward, subject to annual limits. With tax-free growth and tax-free qualifying withdrawals, the FHSA can be an excellent tool for Canadians looking to buy their first home.
First Home Savings Accounts (FHSA) must be opened through a licensed issuer (financial institution, credit union, or insurance company) such as Kinley Financial. Once an FHSA Account has been created for 15 years or by the end of the year you turn 71 (whichever comes first) you can contibute to your account and qualifying investments as little or as much as you please (up to the annual and lifetime contribution limit) through your Financial Institution or Online with either lump sum or through regular Pre-Authorized Contributions (PACs).
The maximum annual contribute each year is $8,000 plus any unused FHSA contribution room. You can contribute up to $40,000 in your lifetime but do not have to contribute to your FHSA every year if you are not able to. Once your FHSA account is opened the unused contribution room each year will automatically be added to your next calandar year contribution limit, allowing you to contribute more than the $8,000 annual limit in later years, up to a maximum of $16,000 per year.
if you contribute $3,000 in year one (from the $8,000 of annual participation room or contribution limit), you can contribute up to $13,000 in year two, consisting of $5,000 of unused participation room carried forward from year one plus $8,000 of participation room in year two.
The investments you make into an FHSA will be there for you tax-free to put down on your first home. While saved those funds will be invested and can continue to grow tax-free, allowing you to potentially have more than expected by the the time you are ready to buy.
Similar to an RRSP, the contributing you make to your FHSA can provide an immediate tax advantage. The amount you invest is deducted from your taxable income for that ear, which may lower the total tax you owe.
There is no taxes applied to your FHSA investment or growth for qualifying withdrawals (to purchase your first home). You will not pay any taxes on the growth or amount you withdrawl (only withdrawals for non-qualifying purposes are taxable)
Whether you're looking to save for the long-term or have a short-term goal in mind an FHSA can help you do it! FHSA can hold a wide-variety of qualified investments, including: Cash, Stocks ETF's (Exchange-Traded Funds), GIC's (Guranteed Investment Certificates), Mutual Funds and more
A First Home Savings Account can be a strong option for Canadians who plan to buy their first home in the future and want to save in a tax-efficient way. An FHSA is often especially valuable for young adults, working professionals, and couples who are preparing for a future home purchase, because contributions are generally tax-deductible and qualifying withdrawals for a first home are tax-free.
An FHSA may be the right choice for someone who wants to save for a first home while also receiving tax benefits along the way. For example, a young professional or couple with steady income who expects to buy their first home within the next several years may use an FHSA to build a down payment more efficiently, while also reducing taxable income through deductible contributions. If a qualifying home purchase is made, the funds can generally be withdrawn tax-free, and if plans change, there may also be options to transfer funds to an RRSP or RRIF on a tax-deferred basis, subject to the rules. An FHSA’s maximum participation period generally ends on the earliest of the 15th anniversary of opening your first FHSA, the year you turn 71, or the year after your first qualifying withdrawal.
Any individual that is a resident of Canada who has a valid SIN, is 18 years of age or older and is a “first-time home buyer” (haven’t lived in a home that you owned or jointly owned during the current or last 4 calendar years) may be eligible to open an FHSA. You cannot open an FHSA or contribute to one until you turn 18. However, when you turn 18, you will be able to contribute up to the full FHSA annual limit for that year.
New to Canada:
You may be eligible to use the FHSA to save for your first home. You’ll need to be a Canadian resident for tax purposes with either a Social Insurance Number (SIN) or a temporary SIN. You also need to be considered a “first-time home buyer”, which means that during the current or last 4 calendar years you haven’t lived in a “qualifying home” that you owned or jointly owned.
There is no minimum number of days that contributions or transfers to your FHSAs must stay in your FHSAs before you can withdrawal them. You can withdraw your FHSA Investment easily in single withdrawal or a series of withdrawals.
Qualifying withdrawals from your FHSAs are without tax consequences. This is when you withdraw from your FHSAs to buy a qualifying home and meet all of the conditions for a qualifying withdrawal. Alternatively you can also complete a designated withdrawal when withdrawal from your FHSAs because you contributed too much and have an excess FHSA amount.
Withdrawals from your FHSAs with tax consequences occurs when your withdrawal is not a qualifying withdrawal, designated amount, or an amount otherwise included in your income, is therefore a taxable withdrawal and you may owe taxes on the investment and growth of the FHSA. A taxable withdrawal must be included as income on your income tax and benefit return.
It's never too late to start saving for your first home. Inquire about a FHSA by speaking with one of our licensed Insurance Advisors. They'll help you find the best account and qualifying investments that meets your financial needs.
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Whatever your life’s goals, our financial professionals can help design a strategy tailored to your specific needs. Kinley Financial is primed to help you prepare for the long term with life insurance, education planning, and retirement strategies.
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