When it comes to saving for your dream home in Canada, you're probably well aware of the diverse range of programs and accounts at your disposal, such as the TFSA, RRSP Home Buyer's Plan, and the recently introduced First Home Savings Account.
Navigating the intricacies of these financial tools can be quite the challenge, given their unique rules and advantages. That's why we've created this informative infographic to provide you with a clear and concise comparison of each, shedding light on their distinct benefits and key differentiators.
What is the First Home Savings Account
The FHSA Stands for the First Home Savings Account. It was first introduced in 2023. A first home savings account is a registered plan allowing, a prospective first-time home buyer, to save for your first home tax-free. There is a yearly contribution limit of $8,000 and a lifetime limit of $40,000
- Contributions in this account are tax-deductible.
- Funds inside this account can be invested.
- Withdraws are non-taxable if used to buy your first home.
- Only available to first-time home buyers.
- Withdrawals do not need to be paid back into the account.
- Unused annual contributions can carry forward to the next year.
- The contribution amount is not based on income.
What is the RRSP Home Buyer’s Plan
The Home Buyers' Plan (HBP) is a program that allows you to withdraw from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. Currently, the HBP withdrawal limit is $35,000.
- Contributions in this account are tax-deductible.
- Funds inside this account can be invested.
- Withdraws are non-taxable if used to buy your first home.
- Only available to first-time home buyers.
- Withdrawals do need to be paid back into the account.
- Unused annual contributions can carry forward to the next year.
- The contribution amount is based on income.
What is the TFSA: Tax Free Savings Account
The TFSA was first introduced in 2009 and is a method available to individuals to set money aside tax-free throughout their lifetime. Unlike a FHSA the money in a TFSA can be withdrawn for any purpose.
- Contributions in this account are not tax-deductible.
- Funds inside this account can be invested.
- Withdraws are non-taxable.
- The account is available to anyone.
- Withdrawals do not need to be paid back into the account.
- Unused annual contributions can carry forward to the next year.
- The contribution amount is not based on income.
Disclaimer
All examples are for illustrative purposes only and are not intended to provide individual financial, investment, tax, legal or accounting advice. This material is for general information and is subject to change without notice. Every effort has been made to compile this material from a reliable source. However, we cannot guarantee that information will be accurate, complete and current at all times. Before acting on any of the above, please make sure to see a financial professional for advice based on your personal circumstances.