What is FHSA and can new immigrants open one?
The First Home Savings Account (FHSA) is a registered plan that allows first-time home buyers to save for a down payment tax-free. You can contribute up to $8,000 per year, and contributions are tax-deductible. Withdrawals for a qualifying home are tax-free.
Can new immigrants open one? Yes, if you are a Canadian tax resident and a first-time home buyer (you haven't owned a home you lived in during the past 4 years). New immigrants typically qualify if they meet these conditions.
FHSA vs. RRSP Home Buyers' Plan (HBP): Which is better? Can they be combined?
The HBP allows you to withdraw from your RRSP for a down payment, but you must repay the amount over 15 years. FHSA withdrawals do not need to be repaid.
Which is better? FHSA is more flexible because you don't have to repay. HBP is useful if you already have RRSP savings.
Can they be combined? Yes, you can use both, but note that transfers from your RRSP to your FHSA are not tax-deductible.
How to open an FHSA and what to bring?
- Check eligibility: Ensure you are a Canadian tax resident and a first-time home buyer.
- Choose a financial institution: Banks, credit unions, etc., offer FHSAs.
- Prepare documents: Usually ID (passport, driver's license), Social Insurance Number (SIN), and proof of address.
- Open the account: Complete the application and confirm your FHSA participation room.
Common pitfalls
- Over-contribution: Annual limit is $8,000, lifetime limit is $40,000. Excess amounts are taxed, but you can apply to reduce or eliminate the tax.
- RRSP transfers not deductible: Transfers from RRSP to FHSA are not deductible; only direct contributions are.
- Non-residents: If you are not a Canadian tax resident, you may not be eligible.
- Withdrawal purpose: Withdrawals must be for a qualifying first home; otherwise, taxes may apply.
0 found this useful
Send this page