The Federal Government is rolling out a new savings account for first-time home buyers, called the First Home Savings Account (FHSA). The Rules took effect April 1st, and Financial Institutions are preparing to offer the accounts.
The FHSA is only available to people who have not owned a home before. It’s important to note that the financial institutions are not required to confirm this, however CRA penalize those not qualified.
It works in some ways similar to an RRSP, and other ways like a TFSA.
- Similar to an RRSP, contributions to the plan are able to be deducted from your taxable income.
- The funds inside the plan grow tax free
- Similar to a TFSA, withdrawals from the plan are not taxed
- Annual contributions are capped at $8000 per year, with a lifetime max of $40,000
- Unused contribution room is able to be carried forward:
- To a maximum of $8,000 per year, and
- Only if a plan was opened (if you are 19 and open a plan, you cannot claim the additional 8K of room you would have earned at 18)
For more information, the following two articles provide greater detail and compare the FHSA with the TFSA and RRSP