Are you currently renting with hopes of becoming a homeowner? Do you have children who are over 18 years old? If so, the new First Home Savings Account could help you and your family get into the real estate market.
What is the First Home Savings Account?
On April 1, 2023, the government introduced the Tax-Free First Home Savings Account (FHSA.) The FHSA is meant to help make saving money for a down payment easier. In fact, it lets first-time home buyers save up to $40,000 tax-free. Are you a couple? If so, the good news is that each of you can start their own account.
How Does it Work?
You can contribute $8,000 per year to the FHSA to a maximum of $40,000 over a 15-year term. Furthermore, any unused contribution room can be carried forward to subsequent years. Meaning, if you open a FHSA in 2023 and contribute $4,000, you can contribute up to $12,000 in 2024.
Unlike other home saving plans and RRSPs any amounts withdrawn from the FHSA do not need to be paid back.
The Fine Print
The contract to purchase a home must be written before October 1st of the year following the year where the FHSA funds were withdrawn. The property that is purchased using the FHSA funds must be occupied as your principal residence within one year of buying or building it. It must also be purchased within the 15-year term or by the end of the year that you turn 71-years old.
Lastly, an income tax deduction can be claimed in the year the contributions to the FHSA are made.
Who is Eligible
To be eligible for a FHSA account you must be:
- A resident of Canada
- At least 18 years of age
- A first-time home buyer. This means you, or your spouse or common-law partner did not own a home that you lived in as your principal residence at any time in the year the account is opened or the preceding four calendar years.
For more information on the FHSA click here.
Do you know someone who is planning to become a first-time home buyer? Contact us today!
