Hey there! Are you looking to buy your first home? Well, have you heard about the first home savings account (FHSA)? It's a registered plan that lets you save tax-free for your dream home, up to certain limits. It started April 1, 2023, you can open an FHSA if you're 18 years or older, a resident of Canada, and a first-time home buyer. Keep in mind that in some provinces and territories, the legal age to open an FHSA is 19.
There are three types of FHSAs:
depositary,
trusted,
and insured.
You can choose to set up a self-directed FHSA if you want to manage your investment portfolio yourself. When you open your first FHSA, your maximum participation period begins and ends on December 31 of the year in which the earliest of the following events occur: the 15th anniversary of opening your first FHSA, you turn 71 years of age, or the year following your first qualifying withdrawal from your FHSA.
The FHSA participation room is the maximum amount that you're allowed to contribute to your FHSAs in a year or transfer from your RRSPs to your FHSAs without exceeding the lifetime FHSA limit or creating an excess FHSA amount. If you're interested in learning more about transfers, you can refer to the section on Transfers between FHSAs and other registered plans.
When you open your first FHSA, your participation room for that year will be $8,000, and your lifetime FHSA limit will be $40,000. Keep in mind that any contributions or transfers you make to your FHSAs will reduce your remaining lifetime FHSA limit.
If you exceed your FHSA participation room in a given year by contributing too much or transferring too much from your RRSPs, you'll end up with an excess FHSA amount.
Your FHSA participation room applies to all the FHSAs you open. You can open more than one account, but the total amount you contribute to all of them and transfer from your RRSPs cannot exceed your participation room for the year. If you do not use up your room, you can carry it forward to the next year, up to a maximum of $8000, which will be included in your participation room for that year. Your spouse or partner can only participate in their own FHSA, and only the account holder can claim contributions as a tax deduction. Unlike RRSPs, contributions made to your FHSA during the first 60 days of the year are not deductible on your previous year’s income tax return, and you cannot claim a tax deduction for any FHSA contributions made after your first qualifying withdrawal.
For more information about FHSA contributions, go to First Home Savings Account (FHSA) - Canada.ca
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