The Government has confirmed that as of April 1, 2023, financial institutions will have the ability to start offering the new Tax-Free First Home Savings Account
(FHSA).
Under
this program, prospective first-time home buyers will have the ability
to save $40,000 on a tax-free basis and, like a Registered Retirement
Savings Plan (RRSP), contributions will be tax deductible. When
a client makes a withdrawal from the plan to purchase their first home,
that withdrawal is non-taxable, just like a TFSA. This plan includes an
$8,000 annual contribution limit and a $40,000 lifetime contribution
limit. For those purchasing with a partner/spouse who is also eligible under this program, bothapplicants will have access to the $8,000, thus doubling their lifetime contribution
limit to $80,000.
Program Highlights
§ [UPDATED] The FHSA and HBP (Home
Buyers’ Plan – RRSP down payment program for First Time Buyers) can now be combined on
the same
qualifying purchase.
§ Applicant must be a resident of Canada and between the age of 18 and 71
years old.
§ Must be a first-time home buyer, defined as someone who has not owned a home in which they have
lived at any time during the calendar year before the account is opened, or at anytime in the preceding four years.
§ Owner of the plan would have the ability to hold a broad range of investments, just like an RRSP
or TFSA.
§ Unlike an RRSP, contributions made in the first 60 days of a calendar year cannot be
applied to the previous tax year.
§ Home buyer has up to 15 years from their first contribution or until their 71st birthday,
whichever comes first, to use the funds to purchase a home.
§ Home buyer can carry forward unused portions of their annual contribution (up to max. $8,000) to
subsequent years, as long as they do not exceed the lifetime limit of $40,000.
§ Funds that are not withdrawn from the plan to purchase a home can be transferred to an RRSP or
RRIF on a tax-free basis.
§ Non-qualified withdrawals from the plan are permitted but will be subject to a withholding tax,
just as they apply to taxable RRSP withdrawals.
