Latest news with #FHSA
Cision Canada
22-07-2025
- Business
- Cision Canada
Tax Tip - Make the most of your first home savings account Français
OTTAWA, ON, July 22, 2025 /CNW/ - A First Home Savings Account (FHSA) lets you save for a qualifying home with tax-free growth and tax-deductible contributions, making it a great option for potential first-time home buyers. But, it's important to make sure you don't put too much into your FHSA. If you do, part of the tax-free growth you're generating could end up going toward taxes anyway! Here are some tips for how you can make the most of your FHSA and avoid any costly errors: Make sure you're eligible FHSAs are intended for people who are saving for their first home – it's right in the name! You can only open an account if you're an adult resident of Canada and a first-time home buyer. Pro tip: To be considered a first-time home buyer, you can't have lived in a home you owned, or shared ownership of, in the past four years. If you have a spouse or common-law partner, you can't have lived in a home they own either. Understand your participation room Participation room is the total amount your FHSA can hold in a given year. When you open your first FHSA, your participation room is $8,000. Pro tip: Unlike a tax-free savings account, your FHSA participation room only starts when you officially open your first account through your financial institution. You can participate in your FHSA by making contributions from your income or other sources, or you can make transfers from your registered retirement savings plan (RRSP). Pro tip: No matter how you choose to participate, the maximum participation room in your account for the first year is $8,000. Each year after your account was opened, you will get another $8,000 of participation room, as long as you stay within your limit each year. The lifetime limit for FHSAs is $40,000. If you don't end up using all of your participation room for that year by December 31, you may be able to use it the following year. You can open more than one FHSA, but having more than one account doesn't mean you get extra participation room. The total room across all your FHSAs will still be $8,000 in the first year, followed by an additional $8,000 each following year, as long as you stay within your limit, up to a lifetime maximum of $40,000. Once you open your first FHSA and file your taxes for that year, you will get a statement on your notice of assessment that lets you know how much participation room you have. You can also find this statement in your CRA account. Don't over-participate Over-participation is what happens when you contribute or transfer more into your FHSA(s) than your participation room for that year. Pro tip: Any amount that exceeds your participation room is called an "excess amount" and it may be taxed. If you over-participate, it affects your participation room for the following year. Any excess amounts will reduce your participation room for the next year. For example, if you opened an FHSA in 2024 and contributed $10,000, your participation room for 2025 will only be $6,000. Don't wait! You will have to pay tax on any excess amount you have in your FHSA every month. Take swift action to resolve the issue – don't let your growth be impacted by taxes! More on this below. Fix your over-participation as soon as possible If you made contributions from your income or other sources to your FHSA, you can make a designated withdrawal to reduce the excess and get your account back within the annual limit. Pro tip: To make a designated withdrawal, fill out form RC727 and give it to your financial institution. If you transferred into your FHSA from your RRSP, you can make a designated transfer to return the excess amount to your RRSP. Pro tip: To make a designated transfer, you also need to fill out form RC727 and give it to your financial institution. You can also remove the excess from your FHSA by withdrawing that amount, but when you do this, it will be considered a taxable withdrawal. Just like it sounds, that means you have to pay income tax on the amount you remove, because it is now considered income. If you have an excess FHSA amount, you have to report it by filling out form RC728 and form RC728-SCH-A. This will determine how much tax you need to pay. If you don't file these forms on time, the CRA may send you a notice of assessment. Pro tip: Sign up for email notifications in your CRA account to get notified every time the CRA sends you mail. Use the Canada Revenue Agency's FHSA estimators There are two FHSA estimators. The first gives you an idea of how much you could save for a down payment, including possible investment growth. The second looks at your potential tax savings, based on your yearly taxable income and province or territory of residence. The estimators have built-in limits to reflect the annual participation room of $8,000 and the $40,000 lifetime limit. These are great tools to try out when planning your FHSA participation. Looking for more information? FHSA statistics for 2023 are available on including how many people opened accounts, the average balance, and the total value of all active accounts. Data for the 2024 tax year is being processed and will be added to this page when available. For more details on how FHSAs work, visit First Home Savings Account on Contacts Media Relations Canada Revenue Agency 613-948-8366 [email protected] Stay connected Follow the CRA on Facebook Follow the CRA on X – @ CanRevAgency Follow the CRA on LinkedIn Follow the CRA on Instagram Subscribe to a CRA electronic mailing list Add our RSS feeds to your feed reader Watch our tax-related videos on YouTube Listen to our Taxology podcast SOURCE Canada Revenue Agency
Globe and Mail
02-06-2025
- Business
- Globe and Mail
With a new GST rebate coming, here's a refresher on other tax breaks for first-time homebuyers
The federal government is moving ahead with a new GST rebate for first-time homebuyers, which may complement existing programs aimed at making housing more affordable. Advisors who help clients, or their clients' children, navigate the purchase of a first home can broaden and deepen their relationship with both the client and family. 'It ends up putting you in situations in which you're having more holistic conversations with a client,' says Jason Heath, a managing partner at Objective Financial Partners Inc. in Markham, Ont. While some tax programs for first-time homebuyers are well known, others are sometimes overlooked and missed, Mr. Heath says. In general, to qualify for these federal tax programs, a first-time homebuyer is someone who has not lived in a home that they or their spouse or common-law partner owns either in the current year or any of the previous four years. Here are the key programs and credits that already exist, in addition to the proposed new first-time homebuyers' GST cut. The FHSA, introduced in 2023, allows a first-time homebuyer to save up to a lifetime limit of $40,000 toward a home purchase. Annual contributions of $8,000 (plus up to a maximum of $8,000 of carry-forward contribution room) to the FHSA are tax-deductible, while withdrawals from the account to purchase a qualifying home, including any growth, are tax-free. Ideally, a first-time homebuyer would open and begin contributing to an FHSA at least a few years before buying a home, Mr. Heath says, because FHSA contribution room begins to accumulate only after someone opens an account. However, a first-time homebuyer can still open an FHSA in the year they buy a home and contribute $8,000 before making a withdrawal. That's because there's no minimum number of days that contributions must be held in an FHSA before being used to make a qualifying withdrawal. What is a qualifying withdrawal? An FHSA withdrawal counts as a qualifying withdrawal if the account holder has a written agreement to buy or build a home by Oct. 1 of the following year, or has bought a home within 30 days before making the withdrawal. Also, the FHSA holder must not have lived in a home they owned in the year of withdrawal or any of the previous four years. Whether the FHSA holder lives in a home their spouse or partner owns isn't a determining factor when making a qualifying withdrawal. The HBP allows a first-time homebuyer to borrow from their RRSP to buy a home without being taxed on the amount. Last year, the federal government increased the amount that can be borrowed to $60,000 from $35,000. 'The old limits didn't allow you to access very much RRSP money,' Mr. Heath says, so the increased amount might allow for a bigger down payment. The borrowed amount generally must be paid back in instalments over 15 years. If the annual minimum repayment isn't made, that amount becomes taxable. Under a temporary change made last year, for withdrawals between Jan. 1, 2022 and Dec. 31, 2025, instalment payments don't have to begin until five years following the year of withdrawal, up from two years under the regular HBP rules. Unlike the FHSA, contributions to an RRSP must remain in the plan for at least 90 days before they can be withdrawn for purposes of the HBP. The Income Tax Act allows first-time home buyers to access both the FHSA and the HBP to purchase the same home. And spouses and partners can each use their own FHSAs and access the HBP to buy the same house. The HBA allows a first-time homebuyer to claim a non-refundable tax credit of $1,500 (which is calculated as 15 per cent of the $10,000 HBA). While the HBA is meant to help first-time homebuyers offset costs associated with buying a new home, those claiming the amount don't have to track expenses. If both spouses qualify as first-time homebuyers, the amount can be split between spouses but the total credit remains $1,500. (The Liberals have proposed a cut to the lowest income tax bracket from 15 per cent to 14 per cent, effective July 1, which would affect the value of the credit.) Mr. Heath says eligible homebuyers sometimes miss claiming the HBA if their tax software doesn't prompt them or if they don't inform their tax preparer that they've bought their first home. The credit is claimed in the year the home is acquired. Provinces and cities may offer their own tax breaks or credits for first-time homebuyers. For example, Ontario provides first-time homebuyers with a land transfer tax rebate, as does the city of Toronto.
Calgary Herald
07-05-2025
- Business
- Calgary Herald
Posthaste: High down payments keep Canadians out of homeownership
Article content Saving up for a down payment on a home is the main obstacle for 32 per cent of prospective homebuyers, according to a new survey, but that's just one of the many hurdles they're facing. Article content Thirty per cent point to high mortgage payments as their top barrier in home ownership, the survey by CPA Canada and BDO Debt Solutions said, but just 10 per cent preferred the flexibility of renting. Article content Article content 'The dream of owning a first home is slipping away for many Canadians,' Nancy Snedden, a licensed insolvency trustee and president at BDO Debt Solutions, said in a news release. Article content Article content 'With the cost of living on the rise, saving for a home has become increasingly challenging. It's concerning that only two per cent of non-homeowners in Canada are able to make their emergency fund a financial priority, while many are relying on credit to cover their expenses.' Article content Down payment amounts depend on several factors, but the minimum needed for a home valued at less than $500,000 is five per cent of the purchase price. For homes valued between $500,000 and $1 million, a five per cent down payment is required for the first $500,000 and 10 per cent for the remainder. Homes valued at more than $1 million require a 20 per cent down payment. Article content Under these general conditions, the average selling price from March of $678,331 would require a down payment of at least $43,833, but home prices are much higher in Canada's urban areas. Article content Article content 'Homeownership is closely tied to financial stability and wealth accumulation,' Li Zhang, a financial literacy leader at CPA Canada, said in the release. Article content Article content 'This is reflected in the behaviour of Canadians: homeowners are more likely to save for retirement and invest, while renters often live paycheque to paycheque. Only four per cent of renters report prioritizing lifestyle spending — most are simply struggling to cover the basics.' Article content It's become so hard to save for a down payment that Canadians are increasingly relying on their parents for support. A CIBC survey in 2024 said 31 per cent of first-time homebuyers relied on parental gifts for a down payment, compared to 20 per cent in 2015. Article content Despite the challenges, the federal government has tried to make saving for a down payment more accessible. Article content The first home savings account (FHSA) is designed to help first-time homebuyers with their down payments, offering savings accounts that work as both a tax-free savings account (TFSA) and registered retirement savings plan (RRSP).
Yahoo
29-04-2025
- Business
- Yahoo
Under 35? Here's How Your TFSA and RRSP Stack Up
Written by Puja Tayal at The Motley Fool Canada Rising inflation and interest rates in 2022 and 2023 reduced consumer spending and pushed Canadians towards savings. The Canada Revenue Agency (CRA) also pushed savings by increasing the Tax-Free Savings (TFSA) limit to $6,500 in 2023 and introducing the First Home Savings Account (FHSA). According to Statistics Canada data from the 2023 tax filing, tax filers in the 25–34 age group reported a median TFSA contribution of $4,500 and a median Registered Retirement Savings Plan (RRSP) contribution of $4,000. There was a balanced allocation between retirement and other savings. Interestingly, tax filers with taxable income above $40,000 had a median contribution of $8,000 in an FHSA, hinting that house buying could increase in the future. These contributions were only for 2023. Comparing your TFSA and RRSP savings with the median can give you a fair idea of how your savings are placed. According to Statistics Canada, singles under 35 had median assets worth $11,980 in their TFSA in 2023. This includes the net amount left after contributions and withdrawals. If you are 30 years old in 2025, your TFSA contribution room was $62,500 in 2023. The average TFSA balance was less than 20% of the contribution room because income is low in the early years of a career. Nevertheless, now is a good time to invest in a TFSA and make the most of the contribution room, as it allows your money to grow tax-free and you can even withdraw tax-free. Remember, time in the market is more beneficial than timing the market. If you find it difficult to invest a large amount in one go, adopt a disciplined investing approach. Every month, contribute 10% of your income to the TFSA. If you earn $4,000 a month, a $400 TFSA contribution might seem doable. As your income grows, so will your TFSA contribution. According to Statistics Canada, singles under 35 have a median asset worth of $16,220 in an RRSP in 2023. The RRSP balance is higher than the TFSA. One possible reason could be that RRSP withdrawals are taxable, which encourages Canadians to stay invested and spend time in the market. Following a similar discipline in a TFSA and staying invested can help you build tax-free wealth. Within a TFSA, you can build two portfolios: a core portfolio of evergreen growth stocks and a satellite portfolio of opportunistic stocks. An evergreen stock worth considering is Descartes Systems (TSX:DSG). The stock is caught in a seasonal dip and a bear market amidst the trade war. However, its secular growth is intact. Its Global Logistics Network and supply chain solutions, such as customs clearance and trade intelligence, have ample demand. Descartes's stock can continue to deliver an average annual growth rate of 20% in the long term as trade complexities increase cross-selling opportunities for Descartes. You can consider buying this stock in the second quarter of every year when it is seasonally weak, accumulating the dips. A $400 investment in Descartes in April 2015 would be $3,066 today. If we add up $400 for the last 10 years, the amount could be significant. Doing a rough calculation, a $1,200 investment every year ($400 x 3 months) for 10 years can grow your invested amount to $12,000 and portfolio value to $36,000, with the stock expected to grow at a compounded annual growth rate of 20%. Shopify (TSX:SHOP) could be an opportunistic buy now before it rallies 50–60% during the holiday season. There are fears of an economic slowdown amid the trade war. However, the Buy Canadian campaign and interest rate cuts could support local spending and drive holiday season sales. Even if Canada witnesses a tepid holiday season this year, the next year could see a sharp jump. This is a stock to buy in the second quarter and sell in the first quarter to make the most of seasonality. The post Under 35? Here's How Your TFSA and RRSP Stack Up appeared first on The Motley Fool Canada. Before you put a single dollar into the stock market, we think you'll want to hear this. Our S&P/TSX market beating* Stock Advisor Canada team just released their Top Stocks for 2025 and Beyond that we believe could supercharge any portfolio. Want to see what made our list? Get started with Stock Advisor Canada today to receive all of our Top Stocks, a fully stocked treasure trove of industry reports, two brand-new stock recommendations every month, and much more. See the Top Stocks * Returns as of 4/21/25 More reading Made in Canada: 5 Homegrown Stocks Ready for the 'Buy Local' Revolution [PREMIUM PICKS] Market Volatility Toolkit Best Canadian Stocks to Buy in 2025 Beginner Investors: 4 Top Canadian Stocks to Buy for 2025 5 Years From Now, You'll Probably Wish You Grabbed These Stocks Subscribe to Motley Fool Canada on YouTube The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Descartes Systems Group. The Motley Fool has a disclosure policy. Fool contributor Puja Tayal has no position in any of the stocks mentioned. 2025 Sign in to access your portfolio
Toronto Star
28-04-2025
- Business
- Toronto Star
Want to save for your first home and pay less tax? A First Home Savings Account helps you do both — here's how
When Amy Bergstrom learned about the First Home Savings Account (FHSA), she saw dollar signs. 'I was like, oh my gosh, I need to hop on this,' recalls the 23-year-old Edmonton property manager. 'Because that's free money.' Bergstrom is one of thousands of Canadians who contributed to a FHSA in 2023, according to new numbers from Statistics Canada. ARTICLE CONTINUES BELOW The down payment-builder is particularly popular among young people aged 25 to 34, who made up 57 per cent of the nearly 484,320 tax filers who put money toward the FHSA in its first year. But with it still being relatively new, you might be wondering, does it make sense for you? And wait — what was that about free money? Here's what it's all about, the upsides and downsides, and what your options are if you never end up buying that home. How the First Home Savings Account works The FHSA is designed to help individuals save for a down payment, and was introduced amid rising home prices. It combines aspects of both the Tax-Free Savings Account (TFSA) and RRSP (Registered Retirement Savings Plan), said Shannon Terrell, lead writer and spokesperson for Nerd Wallet Canada. To open an FHSA you must be between 18 and 71 years old and a Canadian resident. What you make on it is tax free, and the money you put in is tax deductible. ARTICLE CONTINUES BELOW ARTICLE CONTINUES BELOW 'Especially now with the housing market feeling particularly inaccessible for a lot of first-time buyers, every dollar that can be saved or sheltered from tax really matters,' Terrell said. You can put up to $8,000 per year into a FHSA, with a lifetime limit of $40,000. If you make $60,000 a year and you put $8,000 into the FHSA, when you file your taxes that year you can reduce your taxable income to $52,000, added Silvi Woods, manager of the financial planning team at Wealth Simple. Be aware that you start accumulating contribution room (the maximum amount you can put in for a year) once you open the account, which is why you might consider opening one even if you don't have the cash to spare, said Terrell, to 'get the clock ticking.' That's what Bergstrom did, putting in about $250 in late 2023. Her unused room from that year carried forward, so she was able to contribute about $10,000 in 2024. She now puts in $1,200 a month. Once you open the account you have 15 years, or until you turn 71, whichever comes first, to use it for a first home. 'The biggest restriction is that you must not own a home, you or your spouse or common-law partner can't have owned a home this year or four calendar years prior,' added Wealth Simple's Woods. ARTICLE CONTINUES BELOW ARTICLE CONTINUES BELOW Although some young people like Bergstrom are taking advantage of the FHSA, there is still some confusion around how exactly it works, said Dan Broten, senior vice-president and head of EQ Bank. The bank recently conducted a nationally representative survey with Angus Reid Group and found a big 'gap between awareness and action,' he said. More than 80 per cent of Canadians aged 18 to 34 had heard of the FHSA but fewer than one in five had opened one. 'What our data showed is that there's still a lot of confusion around some of the technical elements — like contribution limits, lifetime maximums and how long someone can hold an FHSA,' he added. 'It's worth taking the time to understand how it works and how it can fit into your bigger financial picture.' The upsides Unlike the Home Buyers' Plan (HBP), which allows you to take money out of an RRSP for a home, you don't need to pay the money back, said Woods, who is also a certified financial planner and certified financial analyst. But you can use it in combination with the HBP. When you open an FHSA, you can decide what to do with the money. You can put it into a variety of different things, such as stocks, bonds or mutual funds, Terrell added. Or you can park it in a savings account, with just the interest on that. ARTICLE CONTINUES BELOW ARTICLE CONTINUES BELOW If your investments grow to more than $40,000, you can take those earnings out tax free as well to purchase your first home. This is not considered over-contributing. For example, if your $40,000 turns into $50,000 over the years through wise investments, you can take out the full $50,000. Terrell said people often don't realize they can put their money to work like this, especially if they start early. It's also important to think about when you need the funds, as a longer time frame in general means it makes sense to take on more risk. For example, if you know you won't buy a home for 10 years, your investments would have time to recover from stock market losses. But if you're looking to purchase in the near future, you might want to look at a more conservative investment, like a Guaranteed Investment Certificate (GIC), according to Terrell. You can also delay reporting contributions to reduce taxes in a future year, said Kevin Burkett, tax partner at Burkett & Co. Chartered Professional Accountants in Victoria, B.C., as 'unused room carries forward.' ARTICLE CONTINUES BELOW ARTICLE CONTINUES BELOW For example, if you just graduated and are only making $15,000, and 'you're able to put a few thousand into an FHSA, you could claim that a couple years later when you actually are earning $40,000 a year and you want to lower your tax,' said Woods. What to watch out for One thing to be careful about, said Terrell, is not over-contributing, or you'll be taxed at one per cent per month on the excess amount. You also need to be buying a first home for yourself, not a rental property, when you pull the money out. The account shouldn't be treated as an emergency fund, or to dip into for big expenses like a wedding or car, said Woods. That's because if you remove the money for something other than a home, you'll be taxed on the withdrawals. If you are looking for something more flexible, said Woods, the TFSA is the product for you. If you can, you might want to consider opening both, Woods added. ARTICLE CONTINUES BELOW ARTICLE CONTINUES BELOW What if I never buy a home? Bergstrom is optimistic that she'll be able to save a down payment for a single-family home in Edmonton in a few years. Her budget for her first home is up to $400,000. But with Toronto's prices, that dream is still unrealistic for many young people. An FHSA is not going to magically put a $1.2-million semi in a good school district within your reach overnight. The good news is that even if you don't end up buying, you can transfer the money to your RRSP, said Terrell. 'It doesn't even eat into your RRSP contribution room, so for a lot of folks it's a win-win.' Although popular among millennials and gen-Z, it's an 'overlooked tool' for older renters, because it can roll into retirement savings, said Woods. ARTICLE CONTINUES BELOW ARTICLE CONTINUES BELOW Burkett often sees younger people asking for an RRSP because their parents have told them that's the best option. But even if they don't ever want to own a home and are just trying to save for retirement, he'd still advise them to look at the FHSA. 'You really need to understand the characteristics of the plan, beyond just the simple name,' he said.
