Looking to purchase your first home somewhere down the line? You might qualify for one of Canada’s newest registered savings plans, the First Home Savings Account (FHSA).
If you’re like most Canadians, buying a home has never felt more daunting. According to the most recent numbers from the Canadian Real Estate Association, the average price of a Canadian home currently sits at $716,000. Even after adjusting for inflation, that’s almost three times higher than the average back in the year 2000.
But there is some good news! As of April this year, qualifying Canadians can now open an FHSA – an account that’s really quite groundbreaking, in that it combines the best parts of a Tax Free Savings Account, and the RRSP Home Buyers Plan.
So, what is an FHSA?
The First Home Savings Account (FHSA) allows first time home buyers to save for their first home, completely tax-free. Once opened, home buyers can contribute up to $8000 a year, up to a lifetime maximum of $40k.
Who qualifies for an FHSA?
To qualify, you’ll need to meet all of the following requirements at the time of opening the account:
- You’re a first time home buyer
- You’re between 18 and 71 years of age
- You’re a Canadian resident
What are the benefits of opening an FHSA?
Well first of all, its main advantage over the RRSP Home Buyers Plan is that withdrawals don’t have to be paid back. So right away, that’s a huge relief for so many people.
Additionally, contributions to your FHSA are tax deductible and withdrawals are tax-free, which provides a “best of both worlds” situation for the next generation of home buyers.
While I won’t be the first to say it’s certainly no silver bullet – nothing is – the First Home Savings Account does offer one more incentive to start saving (and accruing tax-free interest!) as early as today.
Looking to purchase your first home? My network of trusted professionals includes financial advisors as well. Contact me today and let’s chat!