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FAQs for TFSA, FHSA, RRSP, and RESP

1. TFSA (Tax-Free Savings Account) FAQs

1. What is a TFSA?
   A TFSA is a savings account that allows Canadians to invest and grow their money tax-free. Contributions are made with after-tax dollars, and withdrawals, including any income earned, are tax-free.
2. How much can I contribute to my TFSA?
   The annual contribution limit varies by year and is set by the government. Unused contribution room carries forward indefinitely. As of 2024, the total contribution room since the TFSA was introduced in 2009 is $88,000, assuming you were 18 or older in 2009 and have never contributed.
3. Can I withdraw money from my TFSA for a home purchase?
   Yes, you can withdraw money from your TFSA for any purpose, including a home purchase, without paying any taxes on the withdrawal.
4. What happens if I over-contribute to my TFSA?
   Over-contributing to your TFSA results in a penalty tax of 1% per month on the excess amount until it is withdrawn or enough contribution room is available.
5. Can I use my TFSA to save for other goals besides a home purchase?
   Absolutely! The TFSA is versatile and can be used for various savings goals, such as retirement, travel, or emergencies, all while allowing your investments to grow tax-free.

2. FHSA (First Home Savings Account) FAQs

6. What is an FHSA?
   The FHSA is a new savings account designed specifically to help Canadians save for their first home. It combines features of a TFSA and an RRSP, offering both tax-deductible contributions and tax-free withdrawals for qualifying home purchases.
7. How much can I contribute to an FHSA?
   The FHSA has a lifetime contribution limit of $40,000, with an annual contribution limit of $8,000. Unused contribution room can be carried forward to future years.
8. What happens if I don’t use the FHSA for a home purchase?
   If you don’t use the funds in your FHSA to purchase a first home, you can transfer them to an RRSP or RRIF tax-free, or withdraw the funds as taxable income.
9. Who is eligible to open an FHSA?
   To open an FHSA, you must be a Canadian resident, at least 18 years old, and a first-time home buyer, meaning you haven’t owned a home in the current year or the preceding four calendar years.
10. Can I hold investments in my FHSA?
    Yes, you can hold a variety of investments in your FHSA, similar to other registered accounts, including stocks, bonds, mutual funds, and ETFs.

3. RRSP (Registered Retirement Savings Plan) FAQs

11. What is an RRSP?
    An RRSP is a retirement savings account that allows you to contribute pre-tax dollars, reducing your taxable income. The funds grow tax-free until they are withdrawn, typically in retirement.
12. How much can I contribute to my RRSP?
    The annual RRSP contribution limit is 18% of your previous year’s earned income, up to a maximum amount set by the government. Unused contribution room carries forward indefinitely.
13. What is the Home Buyers’ Plan (HBP)?
    The HBP allows first-time home buyers to withdraw up to $35,000 from their RRSP to purchase a home. The withdrawal is tax-free, provided it is repaid within 15 years.
14. What happens if I don’t repay my HBP withdrawal?
    If you do not repay the annual minimum amount for your HBP withdrawal, the unpaid amount is included in your taxable income for that year.
15. Can I withdraw money from my RRSP before retirement without penalty?
    Generally, withdrawing from your RRSP before retirement incurs withholding tax, and the withdrawal amount is added to your taxable income. However, exceptions exist, such as the Home Buyers’ Plan and Lifelong Learning Plan (LLP).

4. RESP (Registered Education Savings Plan) FAQs

16. What is an RESP?
    An RESP is an account designed to help save for a child’s post-secondary education. Contributions grow tax-free, and the government provides grants to match a portion of your contributions.
17. How much can I contribute to an RESP?
    There is no annual contribution limit for RESPs, but the lifetime contribution limit per beneficiary is $50,000. Contributions are not tax-deductible.
18. What are the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB)?
    The CESG is a government grant that matches 20% of annual RESP contributions up to $500 per year, with a lifetime maximum of $7,200 per beneficiary. The CLB provides additional funding for low-income families.
19. Can I withdraw money from an RESP for non-educational purposes?
    Yes, but doing so may result in the repayment of government grants, and any investment income withdrawn will be subject to taxes and a 20% penalty.
20. What happens to an RESP if the child doesn’t pursue post-secondary education?
    If the beneficiary does not pursue post-secondary education, you can transfer the RESP funds to another eligible beneficiary, transfer up to $50,000 to your RRSP if you have room, or withdraw the funds. Unused government grants must be repaid, and investment income is taxed.