For many Canadians, buying a home is a major life milestone, but saving for that down payment can be a challenge. Enter the First Home Savings Account (FHSA)—a powerful new tool designed to make the dream of homeownership more attainable for first-time buyers. Here are some key benefits of the FHSA:
- Tax-Free Contributions and Growth
The FHSA allows you to contribute up to $8,000 per year, with a lifetime limit of $40,000. Contributions are tax-deductible, similar to an RRSP, providing immediate tax savings. Additionally, any investment growth within the account is tax-free, which helps your savings accumulate faster. - Tax-Free Withdrawals
Unlike other savings plans, withdrawals from the FHSA used to purchase a qualifying home are completely tax-free. This means you can access your savings and investment growth without facing a tax bill when it’s time to buy your first home. - Flexibility with RRSPs
You can combine the FHSA with the Home Buyers’ Plan (HBP), allowing you to use both accounts to save for your home purchase. This flexibility gives first-time homebuyers even more potential for tax-advantaged savings. - No Rush to Use Funds
If you decide not to buy a home, or if your plans change, the funds in your FHSA can be transferred tax-free into your RRSP or RRIF. This makes the FHSA a low-risk option for long-term saving, whether or not you end up purchasing a home.
The FHSA is a game-changer for first-time homebuyers, combining the best features of RRSPs and TFSAs to help Canadians build their down payment faster and more efficiently. Whether you’re just starting to save or looking to boost your current efforts, the FHSA is worth considering.
If you have any questions or would like to explore how the FHSA can fit into your financial plan, KMR Financial can help! Reach out today to start planning for your first home.
