Anyone who is looking to buy their first home needs to know about this account.
In addition to the RRSP Home Buyers Plan (HBP), both accounts can provide up to $75,000 of tax-free room (and up to $150,000 for couples) to save for a down payment!
Key points:
▪️You must be a first-time home buyer, at least 18 years old and can’t have owned a home in the past 4 years.
▪️You can contribute $8000 dollars a year to a lifetime limit if $40,000 for individuals or $80,000 for spouses.
▪️If you can’t contribute, you can carry forward a maximum $8000 to future years if you have opened the FHSA account.
▪️Over contributions will be taxed at 1 percent every month.
▪️Contributions to the FHSA will be tax deductible against your income (like an RRSP). You can carry forward your deduction indefinitely to a future tax year.
▪️ The account works like a TFSA, your investment gains are tax-free and when your investments (stocks, bonds, mutual funds, ETFs, GICs) grow you can take out more for your first home purchase.
▪️You must reside in Canada when making the withdrawal.
▪️ Use the home as your primary residence for a valid withdrawal.
▪️ You must have a written agreement to buy or build a home in Canada by October first the year following the withdrawal.
▪️Once withdrawn, the funds can be used for a down payment, closing costs or even home expenses such as furniture.
▪️ If you withdraw funds for non-qualifying reasons, withholding tax will apply treating gains like taxable income.
▪️If funds are not being used, you can transfer funds for FHSA to an RRSP or a RRIF on a tax-free basis. These transfers will not reduce or limit an individual’s contribution room. Also, these transfers will not reinstate an individual’s lifetime contribution room.
▪️ FSHA account will close at 71 years of age or 15 years after opening and funds will be moved to RRSP or RRIF.
Reach out to me for more information or to get a referral to one of my preferred tax & mortgage partners.
