This new plan type is one of the measures that the government has introduced to help alleviate the housing crisis. The First Home Savings account provides another tax-advantaged way to save for first time home buyers.
Let’s have a look under the hood.
- Contributions are Tax Deductible: Once you’ve opened the plan you accumulate $8,000 of contribution room each year – independent of your taxable income – and any unused room is carried forward to the new year. The maximum amount you can contribute is $40,000. Like a RRSP, you can carry the tax deduction forward if that makes sense for you.
- Broad Selection of Investment Options: Like your TFSA and RRSP, you have the opportunity to invest FHSA funds in an array of options: from a high interest savings fund to a balanced portfolio.
- Limited Life of a FHSA: A FHSA can be opened once you reach the age of majority. After 15 years, however, the FHSA must be closed. It can be rolled into your RRSP without affecting your available room or cashed out as taxable income.
- Home Buyers Plan & FHSA Work Together: You can use the FHSA and Home Buyers Plan together. That’s $35,000 for the Home Buyers Plan and $40,000 for the FHSA. That’s $75,000. And, if you have a spouse or common-law partner they can access $75,000 as well for a total of $150,000. Unlike the HBP which needs to be repaid to the RRSP over 15 years, the FHSA does not.
If you think a First Home Savings Account may be relevant to you, your kids or friend or family member we are happy to discuss the finer details and see if it might make sense.
Assante is set to launch their FHSA early this summer.
