You are saving for a home, regularly contributing to a separate account. Then you have until December 31st to start contributing to a First Home Savings Plan of which you get:
- Contributions are tax deductible
- Income within the plan grows tax free
- Withdrawals for the purchase of the home are tax free
- If you don’t use the funds for the purchase of a home after 15 years or in the year you turn 71 you can transfer the funds into an RRSP or RIF
Do I qualify? Are you:
- Be between the ages of 19 & 71
- A Canadian resident
- A first-time homebuyer (meaning, you and/or your spouse or common-law partner have not owned a home where you lived in the calendar year in which you open the account or at any time in the preceding four calendar years)
The Benefit
- Your contribution is tax-deductible, think RSP.
- Annual contributions of up to $8,000 a year up to a lifetime maximum of $40,000.
- Once you open an account unused contributions can carry forward to a maximum of $8000. The tax deduction is for the calendar year in which the contributions are made. Please note: the TFSA and RSP contribution limits get carried forward each year regardless of whether you have an account for either. The FHSA requires the account to be open to allow the contribution limits for that year to be carried forward into future years.
- Investment earnings aren’t taxed, so the funds grow faster.
- Why wouldn't you do it? For more information click the link below
How do I set Up
- Your bank or financial advisor can do for you, again think RSP.
- Invest in stocks, bonds, ETF’s, Mutual Funds – make your own decisions or get help from a professional
- Most institutions will have no minimum amount to start
When do I Withdrawal?
Buy a house – all contributions and income can be withdrawn tax free to use to acquire a home The FHSA holder must have a written agreement to buy or build a qualifying home, with the acquisition or construction completion date being before Oct. 1 of the year following the year of a first withdrawal. The definition of a qualifying home for qualifying withdrawals is identical to the rules for eligibility to open an account.
The FHSA holder also must occupy or intend to occupy the qualifying home as their principal place of residence within one year after buying or building it.
If you don’t buy a home you have two options:
- Transfer your FHSA funds directly to your RRSP or RRIF. This transfer is tax-free and will not affect your RRSP contribution room. You must also transfer your FHSA to a RRIF as soon as you turn 71.
- Withdraw the amount from your FHSA. This withdrawal will be taxable on the current year’s income tax return.