Canada First Home Savings Account now available What you need to know


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The First Home Savings Account (FHSA), introduced by the Canadian government in 2022 to help Canadians enter the housing market, has gone live. Institutions including RBC, National Bank and Questrade are among those that have launched the offering this month. The FHSA allows individuals to save up to CAD8,000 ($6,329) per year in a tax-free account, with a maximum contribution room of CAD40,000 ($31,642). Money inside the FHSA can also grow and be invested tax-free, offering a sheltered account for first-time homebuyers to keep building their savings. If you start saving but decide not to buy a home with the money in the account, it can be transferred tax-free to a Registered Retirement Savings Plan (RRSP) without counting against your contribution limits.

The FHSA is similar to the RRSP in that both mean contributions are deducted from your taxable income, but the RRSP is not tax-free on the way out, meaning when you make a withdrawal, that amount will be added to your income for the year, potentially driving up what you owe in taxes. The RRSP also has a feature that lets you save towards real estate called the Home Buyers’ Plan (HBP), where you can withdraw up to CAD35,000 ($27,750) from your RRSP towards the purchase of a home. However, you will have to repay that amount over the next 15 years, or else that withdrawal could be added to your taxable income. The TFSA is also similar to the FHSA, but your savings goals with a TFSA can be a bit more fluid than with an FHSA. Experts suggest that these accounts can be used together to achieve savings goals.

Jason Heath, managing director of Objective Financial Partners, believes that the FHSA is a “great tool for someone saving for their first home” and could improve accessibility to Canada’s housing market.

Read the full article on: Global News

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Forest Hill Real Estate Inc. Distinction
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