The First Home Savings Account (FHSA) is a new registered account that will provide you tax-free savings for the purchase of a first home.
The Tax-Free First Home Savings Account is a savings account meant for home purchases. It’s a new registered plan that allows first-time homebuyers to contribute up to $8,000 per year, with a lifetime limit of $40,000.
Your contributions made to an FHSA are tax deductible, which reduces your taxable income for the current year. Income and gains generated with your FHSA contributions are tax-free.
Lastly, your FHSA contributions aren’t limited to a down payment, if you decide to use this amount for something other than a home, you can transfer the money to an RRSP or RRIF without affecting your contribution room.
The details: Up to $8,000/year and lifetime limit of $40,000
FHSA contributions can be up to $8,000 a year with a lifetime limit of $40,000 and a 15 year lifespan
The FHSA has a lifespan of 15 years. After that time, the funds must be transferred to an RRSP or RRIF.
FHSA vs Home Buyers’ Plan (HBP)
Which might be your best option?
(Note: You can combine the FHSA and the HBP!)
What is the difference between a FHSA and a HBP? What would be best for you is dependent upon your savings goals, and your financial and tax situation.
FHSA
- No repayment required
- No withdrawal limit
- Maximum annual contributions of $8,000 and a lifetime total of $40,000
- No minimum holding period required for contributions to be deductible and eligible for withdrawal
- The deadline for contributions to a FHSA is December 31 of each year
HBP
- Repayment required
- Withdrawal limit of $35,000
- Maximum annual contributions of the RRSP, which is 18% of your previous year’s income or the current fixed contribution limit
- The money must be deposited into your RRSP 90 days before you withdraw it under the HBP
- Deadline for RRSP contributions: 60 days after the end of the year