Enough with the acronyms – FHSA stands for First-time Homebuyer Savings Account. And it can be an excellent way for people to save money and earn tax-free gains to use for purchasing their first home.
So, it’s a Savings Account?
A savings account is a simple way to start putting aside money towards buying your first home. You can designate almost any savings account, new or existing, as an FHSA.
There are many different types of accounts you could consider, including mutual funds, CDs, stocks, bonds, and even a traditional savings account. Talk with your REALTOR® or financial advisor to explore your options.
What exactly does “Tax-free” mean?
When you designate a savings account as an FHSA, you don’t have to pay state taxes for earnings on that money. Federal taxes still apply.
You can contribute up to $50,000 of post-tax money into the savings account. Over time, that principal will grow and earn interest. You
As long as you use that money towards the purchase of your first home, you won’t have to pay taxes. Eligible costs include almost anything related to buying a home, like closing costs, inspections, and lender fees.
Sounds great, how do I sign up?
These accounts are very simple to set up. In fact, you can designate almost any existing account as an FHSA.
All you need to do is complete a form when you file state taxes. This form, for the Department of Revenue, indicates the qualified beneficiary of the account. This could be yourself as long as you’re a first-time home buyer. You can also set up an FHSA for another person, like a child or grandchild.