[ad_1] As we approach the end of the year, there’s a new deadline to keep in mind for your tax and investment planning: FHSA contributions. The First Home Savings Account (FHSA) is new this year (2023) and offers another great opportunity for Canadians to save and invest with tax advantages. The deadline The annual contribution period for the FHSA is January 1st to December 31st. This means that you must contribute before December 31st to have your contribution amount deducted from your taxable income for 2023. Note that this is different from the deadline for your Registered Retirement Savings Plan (RRSP). Unlike RRSPs, any contributions you make to an FHSA in the first 60 days of the year can’t be deducted from the previous year’s income. Get to know the FHSA Now that the deadline is on your radar, let’s review the basics of the account. Launched in April 2023, the newest registered plan is designed to help more people get into the housing market. It allows eligible Canadian investors to deposit up to $40,000 over a 15-year period. From a tax perspective, it combines the advantages of two existing registered plans — the registered retirement savings plan (RRSP) and the tax-free savings account (TFSA). Like an RRSP, contributions to an FHSA can be used to reduce your taxable income. Like a TFSA, if you are making a qualifying withdrawal, you won’t pay tax on that withdrawal (including the principal amount and any potential investment growth). You can contribute up to $8,000 per year to an FHSA, up to a lifetime maximum of $40,000. Unused room can be carried over to the next year (to a maximum of $8,000). Remember, the carry-forward amounts start accumulating only after you open the account. You can open multiple FHSAs, but the annual and lifetime contribution limits apply to the combined accounts, so be careful with your contributions. There is a one-per-cent tax applied to over-contributions for each month the excess amount stays in the account. You have 15 years to save within an FHSA. If you decide not to buy a home during that time, you can transfer the money you’ve saved (and any investment income earned) directly to an RRSP or a RRIF without penalty or tax at the time of transfer. Keep in mind that funds transferred from an FHSA to an RRSP or RRIF account may be taxable when withdrawn. To get more details about the benefits of the FHSA, read 9 Questions Answered About the New First Home Savings Account or watch the video below. Save for your first home, tax-free. The new First Home Savings Account is here Learn More Disclaimers Mutual Funds are sold by Royal Mutual Funds Inc. (RMFI). There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Please read the Fund Facts/prospectus before investing. Mutual fund securities are not insured by the Canada Deposit Insurance Corporation. For funds other than money market funds, unit values change frequently. For money market funds, there can be no assurances that a fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in a fund will be returned to you. Past performance may not be repeated. RMFI is licensed as a financial services firm in the province of Quebec.” Investment advice is provided by Royal Mutual Funds Inc. (RMFI). RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec. Things our lawyers want you to know This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates. Share This Article [ad_2] Source link Post navigation Billionaire Charlie Munger, Warren Buffett’s right-hand man, says a lot of venture capitalists screw their investors Your Money: Common investing mistakes to avoid