The government is giving prospective first-time home buyers an opportunity to save funds in a new savings account, starting today.
The First Home Savings Account (FHSA), comes into effect on Apr. 1 and is a plan allowing those looking to purchase their first home to save free of taxes, with certain limitations.
The government is aiming to assist Canadians in saving for a home down payment amid rising housing prices.
“As home prices climb, so too does the cost of a down payment, which represents a major barrier for many looking to own a home—especially young people,” says the 2022 proposed budget.
To combat this issue, prospective first-time homebuyers can save up to $40,000 with a FHSA. Contributions to the savings account are tax-deductible and similar to a Tax-Free Savings Account (TFSA), withdrawals to buy your first home, in most cases, would be non-taxable.
“Tax-free in, tax-free out,” the budget continues.
When looking to retrieve funds, individuals must qualify for withdrawals, with limitations such as not acquiring the qualifying home for more than 30 days before making the withdrawal and having a written agreement to buy or build completion date before Oct. 1 of the year after the withdrawal.
The annual maximum contribution to the account is $8,000 per year, although an individual is permitted to carry forward unused portions of the annual contribution.
“For example, an individual contributing $5,000 to an FHSA in 2023 would be allowed to contribute $11,000 in 2024 (i.e., $8,000 plus the remaining $3,000 from 2023),” the budget reads.
Those eligible to open a FHSA must be 18 years of age or older, a resident of Canada and a first time home buyer.