First Time Home Buyers Alert! New Savings Strategy!

Did you know that there's a great way for prospective first-time home buyers in Canada to save for their dream home? It's called a first home savings account (FHSA), and it's a registered plan that allows you to save for your first home without paying any taxes on your savings (up to certain limits, of course). The FHSA was made available for opening on April 1, 2023, although financial institutions are gradually implementing it.

To qualify for opening an FHSA, you need to meet a few criteria. First, you must be at least 18 years old.

Second, you need to be a resident of Canada. And third, you should be a first-time home buyer.

Now, let's talk about your FHSA participation room. This refers to the maximum amount you can contribute to your FHSAs or transfer from your registered retirement savings plans (RRSPs) to your FHSAs in a given year, without going over the limit.

In the year that you open your first FHSA, your FHSA participation room is set at $8,000. This means you can contribute up to that amount without any issues.

There's also a lifetime FHSA limit, which is the maximum cumulative amount you can save in your FHSA over the course of your lifetime. For now, the lifetime limit stands at $40,000.

It's important to note that any contributions you make to your FHSAs and any transfers from your RRSPs to your FHSAs will count towards your lifetime limit. So, as you save and transfer funds, your remaining lifetime FHSA limit will decrease.

Lastly, if your contributions and transfers to your FHSAs in a particular year exceed your FHSA participation room for that year, you will end up with an excess FHSA amount.

To learn more about what happens in such cases, you can refer to the section on "What happens if you contribute or transfer too much to your FHSAs."

Remember, the FHSA is an excellent tool for aspiring homeowners in Canada to save for their first home while enjoying certain tax benefits. So, open an account as soon as they are available and start saving!

If you want to find out about more saving strategies, give me a call and we can customize a plan for your situation!