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    • EQ Bank FHSA: Tax-Free Savings For Your First Home

    EQ Bank has joined the ranks of financial institutions offering the First Home Savings Account (FHSA), a tax-free savings plan designed to help you save for your first home. This FHSA not only provides competitive interest rates on savings and Guaranteed Investment Certificates (GICs) but also does so with no fees attached.
    In addition to EQ Bank, several other financial institutions in Canada, including Wealthsimple, Questrade, RBC, and Fidelity, offer FHSA options for aspiring homeowners.

    How to Open an EQ Bank FHSA:

    Opening an EQ Bank FHSA is a hassle-free, digital process that can be done from the comfort of your home.

    Step 1: Start by visiting EQ Bank (please note it’s not available in Quebec). Enter your name and email address to create your banking profile. A passcode will be sent to your email, which you’ll need to enter on the following page. You’ll also need to provide and verify your phone number with a passcode.

    Step 2: Complete the identity verification process by entering your home address, date of birth, and social insurance number. To fund your FHSA, you can connect it to an existing chequing or savings account at another bank. If you’re already an EQ Bank customer, the process is straightforward – simply click on the “Open FHSA” button from your dashboard and follow the prompts.
    Contributions to your FHSA can be made up to $8,000 annually and up to a lifetime total of $40,000. Similar to RRSP contributions, these contributions are tax-deductible, and any investment growth is tax-free, much like the Tax-Free Savings Account (TFSA). To be eligible for the FHSA, you must be a first-time homebuyer between 18 and 71 years of age.

    EQ Bank FHSA Investment Options:

    EQ Bank currently offers two types of FHSA accounts:
    1. EQ Bank FHSA Savings Account: Offers an attractive 3.00% interest rate.
    2. EQ Bank FHSA GIC: Provides even higher returns, up to 5.50%, depending on the GIC term chosen, which ranges from 3 months to 10 years.
    Both types of accounts are eligible for Canada Deposit Insurance Corporation (CDIC) deposit insurance, covering up to $100,000 per insured category per depositor.

    EQ Bank FHSA Fees:

    EQ Bank’s digital FHSA comes with no monthly account fees, just like its other savings and GIC products. However, it’s crucial to be aware that if you overcontribute to your FHSA, the Canada Revenue Agency (CRA) will impose a monthly penalty tax of 1% on the excess contributions. To avoid this penalty, it’s essential to keep track of your contribution limits, especially if you hold multiple FHSAs at different banks.

    Benefits and Drawbacks of the EQ Bank FHSA:

    Benefits

    • Competitive interest rates on FHSA Savings and GICs.
    • No monthly account fees.
    • A fully digital application process for convenience.
    • Tax-deductible contributions and tax-free earnings and withdrawals.
    • The possibility of transferring funds from your FHSA to an RRSP.

      Drawbacks

      • Not available in Quebec.
      • Limited to savings and GICs, with no access to stocks, mutual funds, or bonds.

      EQ Bank FHSA vs. RSP vs. TFSA

      Here’s a quick comparison of EQ Bank’s FHSA, Registered Retirement Savings Plan (RSP), and Tax-Free Savings Account (TFSA):
      • Contribution Limit: FHSA: $8,000 per year and $40,000 lifetime | RSP: 18% of earned income up to a limit | TFSA: $6,500 in 2023, with cumulative room since 2009.
      • Over-Contribution Penalty All accounts face a 1% monthly penalty on excess contributions.
      • Withdrawals: FHSA offers tax-free withdrawals for home purchase, RSP withdrawals are taxable, and TFSA withdrawals are tax-free.
      • Account Expiration: FHSA expires after 15 years, RSPs convert at age 71, while TFSAs have no expiration.
      • Tax-Free Gains: FHSA and TFSA offer tax-free gains, while RSPs are tax-deferred.
      • Tax Deductibility of Contributions: Both FHSA and RSP contributions are tax-deductible, while TFSA contributions are not.
      • Investment Options: FHSA and RSP are limited to savings deposits and GICs, while TFSAs provide flexibility for various investments.

      Frequently Asked Questions

      Yes, EQ Bank provides FHSA Savings and GIC accounts.
      You can contribute up to $8,000 annually and up to $40,000 in your lifetime, with the ability to carry forward unused contribution room.
      If you’re saving for a home, the FHSA offers advantages like deductible contributions and tax-free investment income.
      Withholding taxes may apply if you withdraw funds for other purposes, and the plan doesn’t cover a second home.
      Yes, parents can gift money to a child for their FHSA, and the child can claim a tax deduction for the amount.
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