There's a new savings account coming in 2023.
The First Home Savings Account (FHSA) will be available sometime in the new year for — you guessed it — first-time homebuyers! This new tax-free savings account proposed by the government will aim to help more Canadians own their homes.
Here is what we know about the FHSA account so far.
This new account will be available to open sometime in 2023 You can open a FHSA account at a financial institution or with a financial advisor.
You must meet the following eligibility requirements to open an account:
- You must be a Canadian resident between 18 and 71 years old.
- You don’t currently own a home that you live in.
- You haven’t owned a home in the calendar year of opening an account or within the first four years of opening an account.
Here’s how it will work:
- This account is a tax-free savings account, so you can save for a house down payment on a tax-free basis!
- As a first-time homebuyer, you can make annual contributions to your FHSA that are tax-deductible.
- When you are ready to make a withdrawal to purchase your home, the withdrawals would be non-taxable.
- You can contribute up to $8,000 a year and a total of $40,000 over the course of 15 years (the account’s lifetime).
- Your tax-deductible contributions do not need to be claimed in the year they were generated and can be carried forward like an RRSP.
Rules and regulations that apply to an FHSA:
- A FHSA can only be open for 15 years or until a person turns 71 years old. After one of these events occurs, the money in your account can be transferred to a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund (RRIF) tax free.
- You can make a “non-qualifying withdrawal” meaning you withdraw the money without purchasing a home… but will be taxed regularly.
- A spouse or common law partner cannot directly contribute to your FHSA but they can give you funds to contribute to your own.You can name your spouse as a successor of the account so if you pass away, they receive the funds in their own FHSA.
Benefits of FHSA:
- This account has the combined benefits of tax-free saving accounts like the RRSP and TFSA.
- It will give you — and more Canadians — the opportunity to own a home.
- If you don’t end up using the money to purchase a home, you can still move the money tax free by adding it to your existing or new RRSP.
Want to learn more about FHSA?
Owning a home gives you a sense of freedom and financial security in your life and can become a valuable asset in your retirement. This new account will make owning a home possible for more people.
The FHSA will be available in the coming year. If you'd like more information about how this account could help you or your loved ones, contact us for a consultation and see how we can help you save for your first home.