First Home Savings Account (FHSA)
Beginning in April of 2023, the government is introducing the First Home Savings Account (FHSA) for individuals who are the age of 18 and older and are resident of Canada.
The FHSA offers prospective first-time home buyers the ability to save $40,000 tax-free. Like registered retirement savings plans (RRSP), contributions to a FHSA would be tax deductible. Like tax-free savings accounts (TFSA), income and gains inside a FHSA as well as withdrawals would be tax-free if used for a qualifying home purchase.
Taxpayers are eligible to contribute $8,000/year and can carry forward up to $8,000 of unused annual contribution amount from a previous year (beginning in 2024) to a limit of $40,000 in total.
Income earned in a FHSA and qualifying withdrawals from a FHSA made to purchase a first home are not taxable. You are able to withdraw the entire balance of your FHSA (the maximum $40,000 contributed and income earned on these contributions) to purchase a first home and these withdrawals are not required to be repaid. This differs from the RRSP Home Buyers Plan which only allows you to withdraw $35,000 and requires that you repay the withdrawal over a number of years.
There is the ability to withdraw from the Home Buyers Plan and the FHSA allowing first time home buyers a tax efficient way to save much more for their first home purchase than in the past.
Details are still being released about how the program will operate and your financial advisor should be able to assist eligible individuals in setting up this account starting in April of 2023.
If you have any questions about how this plan will impact you and your family, please talk to your Roth Mosey Advisor.