Purchasing a home is a large investment. And yet, the prospect of purchasing your first home is exciting. Whether buying your first home has been part of your plans for a while or you are still in the formative stages of this decision, we want to let you know about a new program recently introduced by the federal government for first-time homebuyers.
Buyers can now open a First Home Savings Account (FHSA), designed to help first-time homebuyers save up for their dream home. When you open up one of these registered plans, you can save up to $40,000 tax-free to put towards your first home purchase. On a yearly basis, you can contribute up to $8,000 and then deduct the contributions you make from your taxable income. And if you don’t contribute the full $8,000 one year, you can carry over any unused contribution limits into the following year.
Any interest accumulated from the funds held in your FHSA are tax-free. And when you are ready to make the jump and buy your first home, you can withdraw these savings without any tax requirements. You can also use your FHSA in conjunction with the existing Home Buyers’ Plan (HBP), which lets you pull up to $35,000 from your RRSP to buy a home.
To be eligible for an FHSA, you must be at least 18 years old and a resident of Canada. You must not have owned a home or lived in a home owned by a spouse for the past four years. You must also intend to occupy the home you buy as your principal residence.
If you want to use this tax-saving strategy to save up for your first home, you can open an FHSA at any time. Questions? We can help. Simply contact your advisor to set up an appointment. You can also find the complete details on the Government of Canada’s website here.