The Government’s Tax-Free First Home Savings Account Program is Set to Launch in Mid-2023 | Robyn Moser & Associates

Following the recent Fall Economic Statement, the Government of Canada reconfirmed its commitment to introducing a new Tax-Free First Home Savings Account (FHSA), anticipated to launch in mid-2023. Under this new plan, prospective first-time home buyers will have the ability to save $40,000 on a tax-free basis. Similar to a Registered Retirement Savings Plan (RRSP), any contributions will be tax deductible. When a client makes a withdrawal from the plan to purchase their first home, that withdrawal would be non-taxable, just like a TFSA. This plan will include an $8,000 annual contribution limit and a $40,000 lifetime contribution limit.
Key Highlights:§ 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 71^st birthday, whichever comes first, to use the funds to purchase a home.§ Home buyer can carry forward unused contributions to subsequent years, as long as they do not exceed the lifetime limit of $40,000.§ Funds that are not withdrawn from the plan to purchase a home can be transferred to an RRSP or RRIF on a tax-free basis.§ Non-qualified withdrawals from the plan are permitted but will be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.§ The FHSA and HBP (Home Buyers’ Plan – RRSP down payment program for First Time Buyers) cannot be combined on the same qualifying purchase. The home buyer should consult with both a tax and mortgage professional to decide which program better supports their unique situation. Additional details regarding the Tax-Free First Home Savings Plan are available through the Government of Canada website. For more information about the home buying journey, please consider downloading Canada Guaranty’s First-Time Home Buyer’s Workbook, a comprehensive, step-by-step guide available in nine languages! Should you or any of your clients have additional questions, please don’t hesitate to contact me.

Ashtyn Huscroft ,CSC I Mortgage Specialist ITD Canada Trust