Why You Should Open an FHSA This Year
You should open up an FHSA Account this year!
This is for you if you don’t own a home now or in the last four years and are age 18 – 71.
You get contribution room starting the year you open your FHSA, but if you wait until next year you lose that room.
The deadline is December 31.
An FHSA Account is the # 1 way to save for a home down payment if you buy within the next 15 years. You get a tax deduction for contributions, and withdraw tax free to buy your home and you don’t have to repay it.
Just open it. You don’t have to contribute.
More reasons in this post.
Watch the YouTube #short and listen to the podcast for more.
I hope you enjoy it!
Ed
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Hi Claudio,
Good question. For most people, you should deduct your FHSA contribution to bring your taxable income down to the bottom of the 30% tax bracket at about $55,000 for 2024. (This should be $48,000 in Ontario because the EHT kicks in there.) That gets you a 30% refund or more on your contribution.
To deduct it when your income is lower, you likely only get back 20%. It can be worthwhile to deduct it and get a 20% refund if you expect it to be 5 year or more before your income will be high enough to get a 30% refund.
If your income is less than $15-20,000, you probably get no refund at all. In that case, it is best to carry forward your deduction to get at least a 20% refund on it.
Ed
Hi Judy,
I would agree with you to delay opening an FHSA if you are confident you won’t buy a home for 20+ years. But what makes you that confident? If you start saving now, you should be able to afford one before that. Just make sure you think through your reasons for not buying for 20+ years and whether they are real. It’s hard to know what life will bring you over that many years.
Ed
What if I am younger and in a low tax bracket. What income thresholds and strategies might be considered on the timing of claiming the contribution(s) for the tax deduction. Should you claim in the year you contribute or wait until later when you are in a higher tax bracket, and will get a bigger tax benefit?
If you are 20 but don’t see yourself settling down an buying a house until you are in your 40s why would you open a fhsa… wouldn’t you wait until you are more sure you will buy within the next 15 years?