Buying a house in Canada can be tough, especially for those doing it for the first time. To make things easier, the Canadian government started the First Home Savings Account (FHSA) in 2023. This special savings account offers financial benefits to help people buy their first home.
Contents
- 2024 CRA $8000 Tax Benefit
- What is the First Home Savings Account (FHSA)?
- How Does the FHSA Help Home Buyers?
- Keeping an Eye on the FHSA
- Different Kinds of FHSAs
- Who Can Use the First Home Savings Account (FHSA)?
- How Much Can You Put in the FHSA and What Are the Tax Benefits?
- How to Start an FHSA in Canada
2024 CRA $8000 Tax Benefit
The FHSA is a mix of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). It gives you tax breaks and lets your investments grow tax-free. The Canada Revenue Agency (CRA) says this program is for people aged 18 to 71 who haven’t owned a home in the last four years.
What is the First Home Savings Account (FHSA)?
People who can use the FHSA can put in up to $8,000 every year, and up to $40,000 in total. These payments can lower your taxes, and the government will also add 25% to what you put in, up to $10,000 in total. If you can’t put in the full amount one year, you can make up for it in later years.
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How Does the FHSA Help Home Buyers?
With the average home price in Canada around $716,000 in late 2023, the FHSA can help people save up for a down payment faster. It does this by saving money on taxes and letting investments in the account grow without being taxed.
Keeping an Eye on the FHSA
As the FHSA program changes, the people who make the rules and the banks will watch how it affects first-time home buyers. They want to improve the program and help Canadians buy their first home.
Different Kinds of FHSAs
- Depositary FHSA: This simple account holds cash or guaranteed investment certificates (GICs).
- Trusteed FHSA: This account is managed by a trust company and can hold various investments, such as bonds and mutual funds.
- Insured FHSA: This account is part of an annuity contract with a licensed provider focusing on insured products.
Who Can Use the First Home Savings Account (FHSA)?
Criteria |
What It Means |
|---|---|
Age Limit |
You have to be between 18 and 71 years old. |
Living in Canada |
You have to live in Canada right now. |
First-Time Home Buyer |
You can’t have owned a home you lived in during this year or the last four years. |
Other Rules |
If you’re married or have a common-law partner who owns a home, you can’t use the FHSA unless you qualify as a first-time home buyer. |
How Much Can You Put in the FHSA and What Are the Tax Benefits?
- Yearly Limit: You can put in up to $8,000 every year. If you don’t put in the full amount one year, you can put in more in later years.
- Total Limit: You can put in up to $40,000 in total.
- Tax Breaks: The money you put in the FHSA can lower your taxes for the year.
- Government Matching: The government will match your contribution by 25%, up to $10,000 in total.
How to Start an FHSA in Canada
- Check if you can use the FHSA before you start the application process.
- Choose a bank, credit union, trust company, or insurance company that offers FHSAs.
- Compare the services, fees, and investment options offered by different places to find the best one for you.
- Gather the necessary documents, such as your Social Insurance Number (SIN) and proof of your date of birth.
- Give the information and any other documents your chosen place asks for to check if you can use the FHSA.
- Follow the steps your chosen place gives you to open your FHSA officially.
- You can choose someone to get the money in the account if you die, to make sure your savings go where you want them to.
- Start putting money in your FHSA, up to $8,000 annually, to save as much as possible.
- Report your FHSA contributions and activities using Schedule 15 on your income tax return, regardless of whether you made any contributions that year.
- If you want, you can set up a self-directed FHSA to manage your investments yourself.
- Regularly check and change your investment choices and how much you’re putting in to save as much as possible.
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