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). This program allows prospective first-time home buyers 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, both applicants will have access to the $8,000, thus doubling their lifetime contribution limit to $80,000.

Program Highlights

• The FHSA and HBP (Home Buyers’ Plan – RRSP down payment program for First Time Buyers) can now be combined on the same qualifying purchase.
• Applicants 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 any time 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 buyers have 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 buyers 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• Funds that are not withdrawn from the plan to purchase a home can be transferred to an RRSP or RRIF on a tax-free basis.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.

For complete information, please click the link to view the Government Tax-Free First Home Savings Account web page.