What’s the Buzz on the First Home Savings Account?
Laura has begun writing a blog for Truro Buzz, if you’d like to check it out you can find the rest of it at https://trurobuzz.com/whats-the-buzz-on-a-first-home-savings-account/ but there’s a sample below!
There was a time not too long ago when I told clients to have fun when buying their first home. I’d tell them to take their time, really get a feel for their living space. I still think that buying a home should be a positive experience but the changes to the housing market over the last few years has certainly spoiled the mood.
For those wondering, I’ve stopped telling people that because it’s become terrible advice.
There is some good news however, the First Home Savings Account (FSHA) is now available, and I must say there’s an incredible amount of financial horsepower in this vehicle. So I thought I’d take this month’s Buzz on Finance to talk about this new tool. It’s not going to make the housing market any less competitive, but it’s going to help with saving up for that first downpayment.
Great News For First Time Home Buyers
For a lot of registered accounts there’s a give and take, in a previous article I took a look at comparing the Tax-Free Savings Account (TFSA) with the Registered Retirement Savings Account (RRSP). With the FSHA, there’s no real competition, there’s a lot of upside to using it, and there’s not a lot of downside. Which makes it pretty unique, but it’s still important to understand it.
There’s an $8,000 annual contribution limit to the FHSA, that’s an individual limit. For couples that means they could be contributing $16,000 each year. Now here’s where it gets really powerful, those contributions are tax deductible. So they go on your tax return the same way an RRSP contribution does. So long as you take those contributions out for a qualified withdrawal, you don’t pay taxes when that money comes out. So you get a tax deduction when it goes in, and so long as you use it to buy your first home that money doesn’t get taxed later.
That’s really really good.