FHSA: Save for Your First Home with a New Account
Are you a first-time homebuyer in Toronto looking to save up for your dream home? You’re in luck, as a brand-new account type has been introduced to help you do just that. The new account, called the First Home Savings Account (FHSA), kicked off on April 1st, 2023, and is designed to help Canadians save up for their first home in a tax-efficient manner.
With the FHSA, you can contribute up to $8,000 per year, up to a lifetime limit of $40,000. If you don’t reach the annual limit, the unused portion is carried forward. Each year, you can carry forward up to $8,000 of the unused portion from the previous year, up to a maximum annual contribution of $16,000.
But why should you choose it over other savings accounts? The main benefit of an FHSA is its tax efficiency. The contributions you make to your FHSA are tax-deductible (like an RRSP account), meaning you can claim them as a tax credit on your income tax return. Additionally, any investment income earned within the FHSA is tax-free (like a TFSA), and when you withdraw funds to purchase your first home, those withdrawals are also tax-free.
It’s important to note that there are some rules and regulations surrounding the FHSA. To avoid unintended tax implications, it’s recommended that you close all your FHSAs before your maximum participation period expires. This period begins when you open your first FHSA and ends on December 31 of the year when the earliest of these events occurs: your 15th FHSA opening anniversary, you reach 71 years of age, or the year following your first qualifying withdrawal from your FHSA.
In case you withdraw any remaining property as a taxable withdrawal, you must report that amount as income on your income tax and benefit return for the year you receive it. It’s important to keep a record of your contributions since there are regulations about what to do with excess FHSA amounts before you close your FHSAs. Moreover, if there are funds left in your accounts after your maximum participation period expires and they lose their FHSA status, you must declare the fair market value (FMV) of all the funds in your FHSAs as of December 31 of that year as income on your income tax and benefit return for that same year.
So, if you’re a first-time homebuyer in Toronto looking to save up for your dream home, consider opening an FHSA. With exciting new condo developments like Forêt™ Forest Hill by Canderel Residential developing in Toronto, there’s never been a better time to start saving. Suites are starting from the $690’s. Register today at www.liveatforet.ca