First Home Savings Account
On April 1st, the federal government launched the First Home Savings Account (FHSA) to assist first-time home buyers. This program allows these buyers to save up for a down payment for their first home.
It enables qualifying individuals to save up to $8,000 per calendar year (with a $40,000 lifetime limit) in this specific new type of account. They can then apply the money to the purchase of their first principal residence. Provided qualifications are met, the money is tax-free, both when deposited to and when withdrawn from the account.
If a resident of Canada is at least eighteen years old and a first-time homebuyer, they should qualify. There are small caveats to this; we included a link to full information following the article.
The qualifications for opening an FHSA account differ from the qualifications for withdrawing from one, such as reaching the age of majority in their province before being eligible to enter binding contracts when purchasing.
They can open an FHSA with an authorized issuer, such as a bank, credit union, trust, or insurance company. However, many issuers are not set up to open these new accounts yet. Be sure to reach out before going in to open one.
When withdrawing from an FHSA, it remains tax-free if you are a Canadian resident and first-time homebuyer per their definition, provide the correct documentation to the issuer (Form RC725), and have a written agreement to acquire or construct said property before October 1st of the year following the withdrawal.
When closing your FHSA, in order to avoid unfavourable tax consequences, a person must close it on the earliest of the following dates, with the time starting from when the account was opened and ending on December 31 of the year in which the earliest of the following occurs: the account has been open for fifteen years, the person turns seventy-one, or one year expires from the time the first qualifying draw is made.
This article is not intended as legal advice, only information. For full details, scenarios and the fine print of the program, you can click here.