If you are looking to buy a home in Canada, we have some news for you. Canada is planning to get a new Tax-Free First Home Savings Account (FHSA). Recently, Canada announced that the FHSA will be introduced in 2023. If you want to know more about the account, this article is for you.
In Budget 2022, the government proposed the introduction of the FHSA. This account aims to provide first-time homeowners in Canada to save up to $40,000 without any tax implications. This will help them to put aside some money for their first home.
The account will be similar to a Registered Retirement Savings Plan (RRSP). The contributions to this account will be tax-deductible. Also, the withdrawals to purchase a first home—including from investment income—would be non-taxable, like a Tax-Free Savings Account (TFSA).
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Who is eligible for First Home Savings Account
To be eligible you need to be-
- A resident of Canada
- At least 18 years of age
- A first-time home buyer. This means that you should have never owned a house that you’ve lived in the year you open the account or any of the four previous years.
You are allowed to contribute up to $8,000 to your FHSA each year. The lifetime limit is $40,000. Also, you can carry over any unused contribution limits to the next year. Moreover, whenever you are ready to withdraw the money, you have to have a written agreement first. This agreement should be to either purchase or build a qualifying home before October 1 the year after your withdrawal.
Additionally, to be eligible for the FHSA the investment has to be in a housing unit in Canada. It can also be a share in a cooperative housing unit.
Also, even if you have to leave Canada, for any reason, you can still contribute to your First Home Savings Account. However, you cannot make a qualifying withdrawal if you don’t live in Canada.
This is one of Government’s efforts to help Canadians beat inflation. This account will make it easier for Canadians to buy their first house. So, font forget to make full use of this account.
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