The first Home Savings Account will be available to prospective home buyers later this year. (Getty Images)
Canadians will technically be allowed to open a tax-free First Home Savings Account (FHSA) starting Saturday, but the country’s largest bank won’t offer the account to customers until later this year.
The rules for the FHSA, a new registered plan that the federal government hopes will help reduce the amount of time it takes Canadians to afford the downpayment on a new home, went into effect on April 1. However, Canada’s largest bank was not able to confirm this. When will the account actually be offered to Canadians. Yahoo Finance Canada WebMD contacted six of the country’s largest banks, and no lender was able to confirm that the new account would be available April 1.
Royal Bank says it will start offering the account “this spring”. Bank of Montreal says the FHSA will be available “around mid-2023.” CIBC and Bank of Nova Scotia say they will offer the account in the 2023 tax year. TD says the FHSA will be available “later in 2023.” National Bank says it is “working to make the FHSA available to our customers as soon as possible after the law goes into effect on April 1,” adding that the bank is “making every effort to meet the necessary technological advances.” trying his best.”
Ottawa has said it “hopes Canadians will be able to open an account and make contributions in mid-2023,” although a budget tabled earlier this week says the option is available to banks starting April 1. .
Financial institutions are required to submit an application package to the Canada Revenue Agency (CRA) for review and approval in order to begin offering the FHSA to customers. In a statement, the CRA says it is working with financial institutions to ensure that the account meets the requirements of the FHSA program.
“We expect the financial institution to share additional details about its FHSA products with the Canadian public in a timely manner,” a CRA spokesperson said in the statement.
First Home Savings Account: What You Need To Know
Home prices in Canada have increased over the past decade through the COVID-19 pandemic amid a low interest rate environment. Housing prices have declined since the Bank of Canada began one of the most aggressive tightening cycles in its history, but the prospect of owning a home is still out of reach for many.
The Liberal government of Prime Minister Justin Trudeau first unveiled the FHSA in its 2022 budget, with a focus on addressing housing affordability. At the time, the government estimated that the account would provide $725 million in support to Canadians over five years.
the basics
The FHSA borrows features from a Tax Free Savings Account (TFSA) as well as a Registered Retirement Savings Plan (RRSP). Like an RRSP, all contributions to an FHSA are tax-deductible. And, like a TFSA, all growth earned in the account as well as withdrawals are not taxed.
To open an account, you must be a Canadian resident and at least 18 years old. You must also be a first-time home buyer, meaning the account user does not own a home that they have lived in at any time during the calendar year prior to account opening or in the preceding four years. The account can remain open for 15 years, or till the end of the year a person turns 71, whichever is earlier.
Home buyers are expected to be able to put up to $40,000 into their FHSA. The annual contribution limit will be capped at $8,000, so it will take five years for account users to be able to max out their accounts. Individuals are allowed to have more than one FHSA, but the contribution margin cannot exceed the annual and lifetime limits.
FHSA holders are also able to carry forward unused contribution room. This means that if someone deposits $5,000 this year, they will be able to carry over $3,000 into unused room next year.
Similar to the RRSP, the tax deduction must not be claimed in the same year the contribution is made.
When can you make a withdrawal?
The home buyer needs to fulfill certain conditions before making the withdrawal.
Firstly, the account holder should be a first time home buyer. The person must have a written agreement to buy or build a qualifying home before October 1 of the year following the withdrawal. The home must be located in Canada, and it must be your principal residence within one year of purchasing or building the home.
If these conditions are met, the account holder can withdraw the entire amount in the account or make a series of withdrawals. Any savings that are not withdrawn or used will be transferred to an RRSP or a registered retirement income fund on a tax-free basis.
What about the Home Buyers Scheme?
When Ottawa first unveiled the FHSA, it did not allow first-time home buyers to use both the FHSA and the Home Buyers Plan (HBP), a program that allows individuals to withdraw up to $35,000 from the RRSP and use the money. allows payment. 15 years. However, laws that include the FHSA allow individuals to make withdrawals from both accounts when purchasing a home.
This means that between the FHSA and the HBP, first-time home buyers will be able to withdraw up to $75,000 to buy a home.
With files from The Canadian Press
Eliza Siekierska is a senior reporter at Yahoo Finance Canada. follow him on twitter @alicjawithaj,
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