First Home Savings Account
F.H.S.A. Have You Made Your Contribution?
An F.H.S.A. or First Home Savings Account is a registered saving plan and is a tax-free account where you can save money to purchase your first home.
How Does it Work?
First Time Home Buyers can open a F.H.S.A with their financial advisor. You contribute up to $8,000/year of tax free money as you save for a down payment. The lifetime maximum is $40,000.
If you do not contribute the full $8,000, you may carry unused contributions over to the next year.
The Tax Benefits
Yes, your contributions to your F.H.S.A. are tax deductible. Also the income earned within that account is also tax free. Withdrawals you make for a qualifying home purchase are also tax-free. This means that it can reduce your taxable income for the year. It only makes sense to open a F.H.S.A. to save for your 1st home purchase.
Eligibility
You must be a Canadian resident aged 18+ and also a first time home buyer. A first time home buyer means that you or your partner must not have owned a principal residence in the year that the F.H.S.A account is opened or in any of the 4 preceding years.
Investment and Withdrawals
F.H.S.A. may hold a number of investments including mutual funds, stocks, bonds and GIC’s (Guaranteed Investment Certificates).
You can only take advantage of the tax – free benefit when the funds are withdrawn to purchase a qualifying home. If you withdraw the funds for any other purpose, that amount will be added to your taxable income for the year.
Always remember to speak with a qualified financial planner to open up an F.H.S.A account and make sure all your options are available to your long term lifestyle goals.
When working with a mortgage agent you will also want to let them know you are a first time home purchaser so your F.H.S.A. contribution can be combined with the Home Buyers Plan. A mortgage agent will need proof of where your down payment is coming from. This will also maximize your down payment.
For example, if you have the maximum $40,000 in your F.H.S.A and withdraw the maximum of $35,000 from your R.R.S.P under the Home Buyers plan, you can access $75,000; that amount also doubles if you are purchasing with a spouse.
We hope you enjoyed reading this informative blog on F.H.S.A. Benefits. If you are ready to purchase your 1st home and are seeking a reliable mortgage agent; please book your discovery call here.
Donna Withnell
Mortgage Agent Lvl1
BRX Mortgage #13463
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