There is a new tax tool available for Canadian home buyers. It is called the First Home Savings Account (“FHSA”). It will look a bit familiar to Canadians, as it is similar to RRSP and TFSA accounts. It is essentially a special savings account that homebuyers can set up to allow them to save money to buy their first home.
The advantage of this program is that you can set aside money as savings which can be deducted from your income (thus becoming not taxable), to the saver. This money can grow tax free in the account without accruing the obligation to report that gain as income to the saver as well.
HOW IT WORKS
To qualify, a person must be 18 and the money must be set aside for the purchase of a first home only.
A person can contribute up to $8000 a year into the account, to a maximum of $40,000.
Any unused contributions can be carried forward to subsequent years, so if the full $8000 is not contributed in one year, it can be used in the next year (or later).
If a person opens a FHSA, they have 15 years to spend the money on a home. If they do not, they have they option of converting the account to an RRSP or an RRIF without penalty.
If you are looking to buy your first home in the next 10-15 years, there is no downside to opening this type of account and starting to put money away now. You’ll reduce your taxes, start saving money, and create a tangible path to homeownership. For more helpful advice on preparing to buy a home, reach out to Bryan at 204-817-1849!