FHSA
What is FHSA?
An FHSA (First Home Savings Account) is a registered savings account that provides Canadians with a tax-advantaged way to save for a down payment on their first home.
Why open an FHSA?
Tax-deductions
Contributions made to an FHSA are tax-deductible by the amount you contribute, lowering your taxable income for the year.
Tax-free Growth
Contributions to the FHSA can be invested, and any investment income (interest, dividends, capital gains) grows tax-free within the account.
Investment Options
Beyond being a place to put your savings, a FHSA provides various investment selections. This includes stocks, bonds, GICs, mutual funds, and more.
How does an FHSA work?
Each year, individuals can contribute up to a specified limit (e.g., CAD 8,000 in Canada) to their FHSA. There is also a lifetime contribution limit (e.g., CAD 40,000 in Canada).
When you file your annual income tax return, you can claim the total amount of your FHSA contributions as a deduction, thereby reducing your taxable income.
Who can open one?
Canadian residents who are at least 18 years of age and have not owned a home or lived in one owned by their spouse or partner in the current year and the past four years.
Tax Treatment
Tax-Free?
Tax-Deductible?
Tax-Deferred?
Numbers to Know
Conversion Option: If you do not use the funds for a home purchase within the allowed time frame, you may have the option to transfer the funds to another registered account like an RRSP or RRIF without tax penalties.
The funds in your FHSA must be used by December 31 of the 15th year after opening, or the year you turn 71, whichever comes first.
FHSA vs RRSP vs TFSA
FHSA | RRSP | TFSA | |
|---|---|---|---|
Contributions can be deducted from income | |||
Withdrawals DO NOT have to be paid back into account |
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