A first home savings account (FHSA, French: Compte d'épargne libre d'impôt pour l'achat d'une première propriété, CELIAPP) is a financial account offered in Canada since 2023, intended to help first-time homeowners afford a down payment. It has an annual contribution limit of $8000 CAD, up to a total limit of $40,000. Money placed in the account is tax-deductable, comparable to a registered retirement savings plan (RRSP). Money earned in the account through investments is also tax-free, comparable to a tax-free savings account (TFSA).[1] If the money in the account is not used to buy a home within fifteen years, the funds must either be transferred to an RRSP or withdrawn.[2]
Background edit
A previous federal program for first-time homeowners in Canada was the first-time homebuyer incentive, which was offered from 2019 to 2024. The government would provide a loan of up to ten percent on a property that would need to be repaid within 25 years and was a shared equity program with household income thresholds.[3] It was criticized as a "convoluted program that was poorly thought out".[4] The introduction of the first home savings account was received more favourably.[5]
Another federal program used to incentivize first-time homeownership is the home buyers' plan, which allows for a $60,000 CAD withdrawal from an RRSP without financial penalties.[6] The withdrawn funds must be replaced within fifteen years. The home buyer's plan can be used in conjuction with the first home savings account.[7]
Eligibility edit
To open a first home savings account, one must be a Canadian adult that is between the ages of 18 and 71.[8] The Government of Canada has a specific definition of a "first time homebuyer". While a first home savings account cannot be used to buy a second home, people who have previously jointly owned property may qualify under certain circumstances.[9] Couples can have their own individual first home savings accounts and use the combined total in these accounts when buying a home.[10]
History edit
While the first home savings account was officially available on April 1, 2023, no major Canadian financial institution offered these accounts upon its release. All Big Six banks eventually made these accounts available to their customers by November 2023, with CIBC being the last to do so.[11] The Canadian Revenue Agency had technical issues processing 2023 tax returns in which individuals held a first home savings account.[12][13]
References edit
- ^ Lord, Craig. "First home savings account: Here's how you can use it alongside your TFSA, RRSP". Global News. Retrieved 1 April 2024.
- ^ Lord, Craig. "5 things to know before opening a first home savings account". Global News. Retrieved 2 April 2024.
- ^ Benchetrit, Jenna. "First-time homebuyer incentive is discontinued, says federal housing agency". CBC News. Retrieved 1 April 2024.
- ^ Bickis, Ian. "CMHC ends first-time homebuyer incentive, a program critics say 'made no sense'". The Toronto Star. Retrieved 1 April 2024.
- ^ Foran, Pat. "Challenges of the soon-to-end first-time homebuyer program in Vancouver". CityNews. Retrieved 2 April 2024.
- ^ Lord, Craig. "Ottawa changing RRSP Home Buyers' Plan, some mortgage amortization rules". Global News. Retrieved 14 April 2024.
- ^ Scorgie, Lesley-Anne. "You can now combine cash from your FHSA and HBP to buy that first home. Here's how ..." The Toronto Star. Retrieved 2 April 2024.
- ^ Golombek, Jamie. "A deeper dive into the CRA's rules around using a tax-free FHSA to buy a home". Yahoo Canada!. Financial Post. Retrieved 2 April 2024.
- ^ Dallaire, Justin. "It's possible to be a first-time home buyer twice—here's how". MoneySense. Retrieved 2 April 2024.
- ^ Carrick, Rob. "What couples need to know about the new First Home Savings Account". The Globe and Mail. Retrieved 2 April 2024.
- ^ Johnson, Daniel. "All major Canadian banks now offering First Home Savings Account". BNN Bloomberg. Retrieved 2 April 2024.
- ^ Otis, Daniel. "Tax refund delays due to 'processing issues' with home savings accounts: CRA". CTV News. Retrieved 2 April 2024.
- ^ Alini, Erica. "Technical issue at CRA delayed tax refunds for FHSA holders". The Globe and Mail. Retrieved 2 April 2024.