Canada’s New Tax-Free First Home Savings Account To Ease Home Buying
The new tax-free First Home Savings Account is a registered savings account that helps Canadians become first-time home buyers by contributing up to $8,000 per year (up to a lifetime limit of $40,000) for their first down payment, within 15 years. To help Canadians reach their savings goals, First Home Savings Account contributions are tax deductible on annual income tax returns, like a Registered Retirement Savings Plan (RRSP). And, like a Tax-Free Savings Account (TFSA), withdrawals to purchase a first home—including any investment income on contributions—are non-taxable. Tax-free in; tax-free out. First Home Savings Accounts are available at seven financial institutions, and more are set to offer First Home Savings Accounts soon. The new tax-free First Home Savings Account is a registered savings account that helps Canadians become first-time home buyers by contributing up to $8,000 per year until they reach the $40,000 contribution limit (within 15 years of opening their account) for their first down payment, and delivers tax relief when they file their taxes to help them meet their contribution goals. Any Canadian resident at least 18 years of age, and not more than 71 years of age on December 31 of the year, can open a First Home Savings Account to save for their first home. Unused contribution room up to the $8,000 annual maximum and unclaimed contributions can be carried forward. Financial institutions have been able to offer the First Home Savings Account to Canadians since April 1, 2023. The First Home Savings Account can be combined with the Home Buyers’ Plan, which allows Canadians to withdraw up to $35,000 from their RRSPs to buy or build a qualifying home for themselves or for a relative with a disability. Amounts withdrawn under the Home Buyers’ Plan must be recontributed to an RRSP on a non-deductible basis over a period not exceeding 15 years. The new First Home Savings Account to help Canadians save for their down payment builds on the federal government’s work to accelerate housing construction and make homes more affordable for Canadians. This plan includes: A two-year ban on non-resident, non-Canadians purchasing residential property to help curb speculation and ensure that houses are used as homes for Canadians to live in, rather than as financial assets for foreign investors.
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