New details have surfaced about Canada’s new tax-free First Home Savings Account (FHSA), and it could be a good option for anyone looking to enter the housing market in the future.
The FHSA will launch in Canada in 2023, and a recent press release outlined what it might look like.
The new account aims to give first-time homeowners in Canada a place to save up to $40,000 with no tax implications by putting that money into their first home.
As with RRSPs, contributions to the account are tax-deductible, and when you’re finally ready to buy a home, your withdrawals are tax-free.
To qualify for the account, you must be a Canadian resident and be at least 18 years old.
You must also be a first-time home buyer, meaning you have never owned a home in the year you opened the account or in any of the last four years.
You can contribute up to $8,000 to your FHSA annually, with a lifetime limit of $40,000, and you have the ability to roll over unused contribution limits to the next year.
So, for example, if you deposit just $4,000 one year, you can deposit $12,000 the next year.
And when you’re ready to withdraw the money you’ve saved, you must enter into a written agreement to purchase or build a qualifying home before October 1, one year after your withdrawal.
To qualify, the investment must be an interest in a residential unit or cooperative in Canada.
There’s an interesting twist for those looking to take advantage of the Canadian homebuyer plan with this new account. Per the announcement, you cannot make FHSA and Home Buyers Plan withdrawals for the purchase of the same property.
And if you plan to leave Canada, you can still contribute to your FHSA if you emigrate from the country. However, if you reside elsewhere, you will not be able to make a qualifying withdrawal.
With these new details, some Canadians could be one step closer to buying that dream home.
Combine that with some hopeful predictions for the year ahead and recording your first home can be easier than you think.
The cover image of this article was used for illustration purposes only.