Are you dreaming of purchasing your first home? Then you're probably familiar with the emotional rollercoaster of trying to break into the market to get your dream home. One of the most significant barriers to becoming a homeowner: saving enough for a down payment.
In an effort to help more Canadians enter the housing market, the Government of Canada introduced a new registered plan through its 2022 budget, called the Tax-Free, First Home Savings Account (FHSA). Through the new account, prospective home buyers can save up to $40,000 tax-free for the purchase of their first home. The FHSA is packed with powerful benefits that can help you save faster than ever before and will come into effect at some point in 2023.
Here’s a closer look at 7 commonly asked questions about the FHSA:
The FHSA is a registered plan designed to help first-time homebuyers save for a down payment. It combines the very best features of a registered retirement savings plan (RRSP) and tax-free savings account (TFSA).
There are also certain duration requirements for the FHSA. Accounts can stay open:
To open an FHSA, you must be:
The FHSA has a few powerful incentives:
An account holder must meet certain conditions to withdraw money tax-free. You must:
Change happens. So, what do you do if your circumstances shift, and you no longer need to purchase or build a home?
You can transfer any savings from your FHSA into a RRSP or RRIF. This transfer is done on a tax-free basis. Your savings are only taxed when they are withdrawn and not used for a first home purchase.
Once the money is withdrawn, it does not need to be repaid.
We’ve covered some of the most common questions about the FHSA in this piece. To learn more or check for updates, please visit the Tax-Free First Home Savings Account information page on the Government of Canada website.
In the meantime, start dreaming about your new home – with the FHSA, you’re one step closer to becoming a homeowner.
You are solely responsible for confirming that your FHSA, TFSA and RRSP contributions are within your allowable limits set by Canada Revenue Agency (CRA). All rules and contribution limits for FHSAs are set out by CRA and applicable legislation apply. Information about FHSAs is based on what is currently available from the Canadian government and may be subject to change.