TAX FREE HOME SAVINGS (FHSA)
The tax-free First Home Savings Account (FHSA) proposed in the 2022 federal budget is on the cusp of launching this April. The FHSA features some of the best aspects of Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Plans (TFSA) providing an additional tool for future first-time homebuyers to save their down payment. Please excuse all the acronyms!
The FHSA will permit annual contributions of up to $8,000 to a lifetime maximum of $40,000. Like RRSPs, but not TFSAs, FHSA contributions are tax-deductible. Like TFSAs, FHSA withdrawals are not taxable when used for an eligible purchase. RRSP Home Buyers’ Plan (HBP) withdrawals up to $35,000 are tax-deferred but will be taxable if not repaid over the ensuing 15 years. FHSA withdrawals do not have to be repaid.
You can expect to hear much more about the FHSA over the coming months as financial institutions launch their products. Prospective first-time homebuyers will get tangible benefit from this new savings account featuring the best features of both RRSPs and TFSAs.