Today, the Honorable Marc Miller, Minister of Immigration, Refugees and Citizenship, shared the details about the new tax-free first home savings account (FSHA) designed specifically for first-time homebuyers.
Watch the Announcement Here:
A First Home Savings Account (FHSA) is a registered plan by the government that lets first-time homebuyers save money for their first home without having to pay taxes on it, up to a certain amount.
Launched on April 1, 2023, this registered plan has gained significant popularity, with “tens of thousands” of Canadians already opening First Home Savings Accounts.
- Up to $8,000 per year: You can contribute up to $8,000 annually into this account.
- Lifetime Limit of $40,000: Over 15 years, you can contribute up to a maximum of $40,000.
- Tax Deductible: Just like your Registered Retirement Savings Plan (RRSP), the contributions you make to this account are tax deductible on your annual income tax returns.
- Tax-Free Withdrawals: When the time comes to buy your first home, you can make tax-free withdrawals, including any investment income on your contributions. Tax-free in, tax-free out!
A Helping Hand for Housing Affordability
We understand that soaring house prices have made saving for a down payment challenging, especially for young Canadians. The First Home Savings Account is here to change that, putting homeownership back within reach.
How Can You Get Started?
Financial institutions across Canada have been offering the First Home Savings Account since April 1, 2023, and the list is growing. Check with your bank or credit union to see if they provide this account.
Combining Benefits: First Home Savings Account and Home Buyers’ Plan
You can combine the power of the First Home Savings Account with the Home Buyers’ Plan. This plan lets you withdraw up to $35,000 from your RRSP to buy or build a qualifying home for yourself or a relative with a disability.
Just remember, you’ll need to recontribute the withdrawn amount to your RRSP within 15 years on a non-deductible basis.
Real-Life Example: How the First Home Savings Account Can Help You
Let’s meet Olivia and Amira, two aspiring homeowners in Quebec. They both maximize their contributions to the First Home Savings Account, getting the maximum tax benefits. Here’s how it goes:
- Over 5 years, they each save $8,000 per year, which is a total of $40,000 combined (including $10,000 in investment returns).
- They can withdraw this money tax-free as a down payment on their first home.
- This strategic move allows them to qualify for a mortgage and purchase their dream home.
More Measures to Boost Housing Affordability
The First Home Savings Account is part of the federal government’s broader plan to make housing more affordable. Some additional measures include:
- A 2-year ban on non-resident, non-Canadians purchasing residential property to curb speculation.
- A 1% annual underused housing tax on the value of non-resident, non-Canadian-owned residential property that’s vacant or underused.
- Ensuring profits from flipping properties held for less than 12 months are taxed fairly.
- Doubling the First-Time Home Buyers’ Tax Credit to provide direct support for offsetting closing costs.
Housing Accelerator Fund: Building More Homes
To remove local zoning barriers and incentivize housing construction, the federal government has launched a new $4 billion Housing Accelerator Fund. The goal? Creating at least 100,000 net new homes across Canada.
Helping Vulnerable Groups: Rapid Housing Initiative
The Rapid Housing Initiative aims to provide 4,500 new affordable housing units for Canadians in severe housing need, with a significant portion targeted toward women. This is a step towards a more inclusive housing landscape.
Continued Commitment: Ending Chronic Homelessness
The government is dedicated to its goal of ending chronic homelessness through Reaching Home, Canada’s Homelessness Strategy, with over $500 million invested to make it happen.
Support for Low-Income Renters
A top-up to the Canada Housing Benefit in December 2022 provided low-income renters with a $500 payment to help with housing costs.
“Canadians can now reach their goal of home ownership more quickly through the tax-free First Home Savings Account. By opening up an account, Canadians can save up to $8,000 tax-free each year and make their money go further.
In combining measures that help put home ownership within reach, like the First Home Savings Account, with a strategic and economic immigration approach, the Government of Canada is making housing more affordable and bringing in the skilled workers required to build more homes. With provinces needing workers to meet housing demands and the home building sector facing immense challenges in acquiring talent, it is crucial for immigration to be factored into the overall approach, as newcomers are an undeniable part of the solution.”The Honourable Marc Miller, Minister of Immigration, Refugees and Citizenship