You might have heard the news: the government of Canada has introduced the First Home Savings Account (FHSA), targeted for first-time home buyers, and you probably have a few questions: What are the benefits to a FHSA? Do I qualify for a FHSA? What’s the difference between a FHSA and a TFSA? What is the difference between the FHSA and a home buyers plan?
The first home savings account is a new registered savings plan that is targeted for first-time home buyers. To qualify for a FHSA, you need to be a Canadian resident, between the ages of 18 and 71, and it must be used for the purpose of buying your first home. You are considered a first-time homebuyer if you or your spouse/common-law partner did not own the home that you lived in in the year you open an FHSA or the preceding four calendar years.
There are 2 main benefits to the FSHA: the first one being that the contributions that you make reduce your taxable income - very much like an RRSP. The second benefit is that the earnings are tax-free if they are used for the purpose of purchasing your first home. In other words, a FHSA is very much like a tax -free savings account (TFSA).
As an investment product, any of the unused funds in your FHSA can be transferred to an RRSP or a retirement income fund (RIF) without tax implications.
You can add up to $8,000 each year, to a maximum $40,000 contribution. All contributions plus earned interest can be withdrawn for the purpose of a first-time home purchase.
The difference between the first home savings account and the home buyers plan is that the home buyers plan is a withdrawal from your RRSP. This withdrawal can be up to $35,000 but is expected to be paid back within 15 years. Otherwise, it will count as taxable income. You can use both the first home buyer savings account and the home buyers plan for the purchase of your first home.
To learn more about the FHSA or to discover if it’s the right product for you, book an appointment with a member of our Wealth and Investment team or visit kindredcu.com.
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Aviso Wealth, Inc.
Disclosure:
The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. Mutual funds and other securities are offered through Qtrade Advisor, a division of Credential Qtrade Securities Inc. Aviso Wealth Inc. ('Aviso') is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and The CUMIS Group Limited. The following entities are subsidiaries of Aviso: Credential Qtrade Securities Inc. (including Credential Securities, Qtrade Direct Investing, Qtrade Guided Portfolios, Qtrade Advisor and Aviso Correspondent Partners), Credential Asset Management Inc., Credential Insurance Services Inc., Credential Financial Strategies Inc., and Northwest & Ethical Investments L.P.