New this year: the FHSA
Are you putting money aside to buy your first home? Then you have no doubt heard about the first-home savings account, or FHSA. This is a new type of savings account that allows your savings to grow in a tax-sheltered environment while you save for a down payment on your first home. You can contribute a maximum of $8,000 per year to a lifetime limit of $40,000. Key point: unlike contributions to a tax-free savings account (TFSA), FHSA contributions are fully deductible for tax purposes. Does that mean you should hurry to deposit some money before year-end so that you can deduct it in a few months’ time? Maybe… but not necessarily: there are many factors to take into account. For a clearer picture, talk to your advisor and read our article on this topic.
The HBP is still there
By the way, the FHSA hasn’t replaced the Home Buyer’s Plan (HBP), which offers a no-penalty way to withdraw funds from your registered retirement savings plan (RRSP) to use for a down payment on your first home. If you are about to take advantage of the HBP, consider the possibility of waiting until the beginning of next year rather than opening one right away. This will give you an extra year to buy or build your qualifying home, since this must be done no later than October of the year after you open your HBP. In these uncertain economic times, this bit of leeway could end up being helpful.