As we get closer to the end of the year, now might be a great time to go ahead and do certain financial moves before January 1, 2025 comes around to not miss out on a great opportunity.
The TFSA and FHSA accounts mentioned below are only available to those who reach age of majority in their province and have a Social Insurance Number (SIN)
Opening a First Home Savings Account (FHSA) Account
The First Home Savings Account (FHSA) is an account that you can contribute to in order to help save for a down-payment for a property you can purchase (condo, house, duplex, etc). With this account, you can hold a variety of investment products such as stocks, bonds, GICs, mutual funds, etc.
Much like the RRSP, contributions to this account are tax deductible. The maximum yearly contribution amount to this account is $8000 for a lifetime total of $40000.
Unlike RRSPs or TFSAs, the contribution room for an FHSA does not carry forward. If you don’t open an FHSA this year, you will only be able to contribute a maximum of $8,000 in 2025, rather than $16,000 if you had opened your account in 2024.
For more information about the FHSA, you can read more here.
Withdrawing funds from your TFSA
While the Tax Free Savings Account is a great product to shield you from paying tax on your within the account if you have a big purchase or expense, now would be a great time to withdraw funds.
The funds you withdraw from the TFSA, as mentioned above, will not cause you to lose the contribution room so if for example you withdraw $20000, come January 1, 2025, you will have that contribution room available and the additional $7000 contribution room for 2025 for your TFSA.
If, for example, you withdrew $20000 in 2025 and put back the $20000 in the same year, it would be considered a contribution to your account. This may trigger an over-contribution in which you will be taxed by the federal government of 1% of the highest excess of that month until you transfer out the overage amount and will have to wait until the following calendar year to regain the contribution space.
To find out your maximum TFSA room, you can log into your account at the CRA website or contact them via telephone.
For more information about the Tax Free Savings account you can read more here.
