With interest rates rising and inflation at an all time high, now more than ever first time home buyers are feeling the crunch when it comes to saving for their first home or condo. The Canadian government has recently implemented some new saving opportunities that should catch the eye of home buyers looking to get into the market and own their first piece of property!
The New Federal First Home Savings Account (FHSA)
Unveiled with the 2022 federal budget, and set to be available to Canadians in 2023, the First Home Savings Account is a new way to save. This new program is particularly exciting as it will be the only savings account that is actually tax free! Unlike Registered Retirement Savings Plans (RRSP) and Workplace Pension Plans which are tax deducted at the point of withdrawal, the new FHSA will offer the opportunity to save taxes at any point. Budget 2022 proposed to introduce this Tax Free First Home Savings Account as a way to give prospective first-time home buyers the ability to save up to $40,000. Like an RRSP, their contributions would be tax deductible, and then the withdrawal of the funds when used to purchase a first home, would also be non-taxable.
Further to the savings and the initial purchase of the first home, the capital gains on the house/condo are also tax-free, as is the money made on the sale of the property later on. The government intends to work with financial institutions to ensure that a Tax- Free First Home Savings Account could be opened and contributed to in 2023.
If you are looking to buy your first home in the future, this will be a win-win to help avoid paying tax dollars on your savings and get you one step closer to that down payment! For more information on this up and coming Federal savings account click here