Canada’s latest federal budget, in an effort to help Canadians enter the homeownership market, introduced the First-Time Home-Buyer’s Savings Account, or FHSA for short.
Available in 2023, this new account will offer a purpose-driven tax-sheltered investment option for those actively saving for their first home purchase. You may be wondering if there’s already a program like this available? Yes and no. There’s currently the Home Buyer’s Plan which allows Canadians to withdraw up to $35,000 from their RRSP without the usual withholding tax and income tax, as long as they pay it back over the course of 15 years (or sooner).
The FHSA is a bit of a hybrid between the Tax-Free Savings Account and the Home Buyer’s Plan. Some of the key features you should know about are:
- tax-deductible contributions
- annual contribution limit of $8000, but unused portion does not carry forward
- lifetime maximum withdrawal of $40,000, with no repayment requirement
- investment growth is tax-free
- withdrawals only available for the purchase of a first-time home, and are tax-free
- plan must be used by the age of 40, or transferred to an RRSP
- can not be used in coordination with any other program, such as the Home Buyer’s Plan
- you CAN transfer funds from your RRSP to FHSA, without a tax-deduction for the contribution
Wondering how this compares to the TFSA and RRSP Home Buyer’s Plan?
Let’s break it down…
| TFSA | FHSA | RRSP Home Buyer’s Plan | |
| Tax-Deductible Contributions | no | yes | yes |
| annual contribution limit | $6,000 | $8,000 | whatever your RRSP contribution limit is |
| carry forward of unused contribution room | yes | no | yes |
| withdrawal amount maximum | no limit | $40,000 | $35,000 |
| tax-sheltered growth | yes | yes | yes |
| repayment required | no | no | yes, over 15 years |
| age restrictions for withdrawal | none | 40 | none |
| coordination with other programs | yes | no | yes |
| Transferability to other personal investment contracts | yes | to/from RRSP | not without penalty |
Every new type of program has kinks that will be worked out once the practical use of it begins, however this is what’s been released so far.
Is this a plan you’d want to use, or have more information on?
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