3 Reasons Why 1st Time Homebuyers Need To Open A First Home Savings Account Before December 31st. 🇨🇦

Dec 28, 2023 7:53 pm

Unveiling the Perks: 3 Benefits of a First Home Savings Account in Canada

Saving for a home is a monumental financial goal for many Canadians, and a tax-free first home savings account emerges as an excellent tool to expedite this journey. Designed to offer financial incentives and flexibility, these accounts present a compelling option for individuals looking to build a solid foundation for homeownership. In this email, we explore three key benefits of a tax-free home savings account in Canada.

*The FHSA was launched earlier this year by the federal government as a new vehicle to help prospective first-time buyers save for their home purchase.

“As long as you’re taking the money out for the purposes of purchasing an eligible home, there are no tax consequences,” David Gyurtis, regional vice president at Mortgage Alliance and financial advisor at Keybase Financial Group, told CMT.

The FHSA allows first-time homebuyers to contribute up to $8,000 per year up to a lifetime limit of $40,000. Any unused contribution room in a calendar year will be carried over to the following year.

For this reason, many financial advisors are suggesting that people open a FHSA account this year in order to accumulate the additional contribution room.

For those who are undecided about whether they want to purchase a home, Gyurtis advises that people at least open their FHSA to start accumulating the contribution room, even if they still plan to put most of their investments into a TFSA.

“I tell people at least get it open this year,” says Gyurtis. “If I put in $5, I will get that and whatever I don’t use this year carries over to the following year.”

Then, if they decide they do want to purchase a home later on, they can transfer the money into the room they accumulated in the FHSA and get a tax receipt to deduct from their income tax.

“If you’re really on the fence, put the bulk of your savings into your TFSA, then as soon as you’re ready, you can flip it over to the FHSA,” says Gyurtis.

If you don’t end up purchasing a home, the amount in your FHSA can be transferred to your RRSP tax-free.

“The nice thing is any money that’s in that plan—let’s say you don’t buy a property—you can actually transfer that to your RRSP with no tax consequences,” Gyurtis said. “It won’t even affect your contribution room into your RRSP.”

From Canadian Mortgage Trends (Published Online Dec. 19, 2023)*