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What is the First Home Savings Account?
What is the First Home savings account? The First Home Savings Account or FHSA is a registered account designed solely for first time homebuyers to save up their down payment. Prospective first time home buyers are allowed to contribute $8000 per year up to a maximum of $40000. These contributions are tax deductible! It is a great place to temporarily park your funds that you intend to put towards a home purchase.
Who can use the FHSA account?
You are eligible to open a First Home Savings Account if you are over the legal age in your province, are a Canadian Resident and are a first time home buyer. If a prospective home buyer has not owned a home in the prior 4 years or had permanent residence in a home owned by a spouse or common law partner in the last 4 years they are considered a first time buyer.
How do you open an FHSA ?
Any qualifying issuer can open this account. These may include banks, credit unions, trust and insurance companies. To open an FHSA you will need to supply your issuer with your social insurance number, Date of birth, and any other documents required to verify you are qualified.
Contributing to a First Home Savings account
$8000 per year of contribution room up to a maximum of $40000 are the amounts a prospective buyer can contribute. A carryforward is allowed up to a maximum of $8000. So if you miss contributions one year you would be able to contribute up to 16000 the following year. You can make contributions on your own or you can transfer to the FHSA account from you RRSP on a tax deferred basis. Transfers from RRSP to FHSA are not eligible for a tax deduction.
Withdrawing Funds from the FHSA
To make a qualifying withdraw you must meet certain criteria.
- You must complete the required form through your FHSA issuer
- You must be a first time home buyer
- You must have a written agreement to purchase or build a qualifying home
- You must not have taken possession of the home more than 30 days prior to requesting the withdraw
- you must be a resident of Canada
- You must occupy the home as your principal residence for one year after buying or building it
The withdrawal is considered taxable if the qualifying criteria is not met.
The account will need to be closed by December 31 of the year following any qualifying withdrawal. Any excess funds may be transferred on a tax deferred basis to an RRSP or RRIF or withdrawn on a taxable basis.
The account must also be closed on the 15th anniversary of its opening or when you turn 71 years of age. Whichever occurs first.
Overall the First home savings account is a great option for saving your down payment. Although their are many other options available for saving this is the only registered options that allows tax deductions when saving for a down payment. For more in depth information please visit the Government of Canada Website.
If you are using a First Home Savings Account we can help guide you through the process of using it for down payment!
Get in touch with us for more info. Contact us.
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Jessica Kriekle
Mortgage Associate
Mortgage Alliance Advance Mortgage
