Maria is planning to buy her first home in five years. She has heard about the First Home Savings Account (FHSA). Which feature of the FHSA would be most appealing to Maria, combining elements of both an RRSP and a TFSA?

Question: Maria is planning to buy her first home in five years. She has heard about the First Home Savings Account (FHSA). Which feature of the FHSA would be most appealing to Maria, combining elements of both an RRSP and a TFSA?

Answer options: ✅ Contributions are tax-deductible, and qualifying withdrawals for a first home are tax-free.

• Contributions grow tax-free, and any withdrawals for her first home are taxable but at a reduced rate.
• Only the investment income earned within the FHSA is tax-free upon withdrawal for a first home.
• It primarily acts as a loan program providing funds for a down payment, which must be repaid.

Correct answer: Contributions are tax-deductible, and qualifying withdrawals for a first home are tax-free.

Explanation: The FHSA combines the tax-deductibility of contributions (like an RRSP) with the tax-free status of qualifying withdrawals for a first home (like a TFSA). This makes it a powerful savings vehicle for first-time homebuyers.