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What the FHSA?

First Home Savings Account

Subject to approval, the recent Canadian budget proposes a new type of investment account to help Canadians with first-time home purchases. This is big news for some Canadians—really the biggest investment account since the introduction of the TFSA in 2009. The account would be available in 2023 and offers the following benefits:

  1. Contributions will be tax-deductible – similar to an RRSP.

  2. Income earned in the FHSA would not be subject to tax.

  3. Qualifying withdrawals made to purchase a first home would be non-taxable.

  4. To open an account, an individual must be a resident of Canada and at least 18 years old and must not have lived in a home that they had owned either:

    1. At any time in the year the account is opened, or

    2. During the preceding four calendar years.

  5. Individuals would be limited to making non-taxable withdrawals in respect of a single property in their lifetime. Once an individual has made a non-taxable withdrawal to purchase a home, they would be required to close their FHSAs within a year from the first withdrawal, and would not be eligible to open another FHSA.

  6. Lifetime contributions of $40,000, $,8000 annual contribution limit, unused contributions cannot be carried forward.

  7. Amounts withdrawn for purposes other than a home purchase would be taxable.

  8. Unused funds in an FHSA can be transferred to an RRSP or RRIF without any tax consequences. Transfers to an RRSP do not reduce nor are they limited by the contribution limit.

  9. If the funds are not used for a qualifying home purchase within 15 years of first opening an FHSA, the account would have to be closed. Any funds in the account can be transferred to an RRSP/RRIF or be withdrawn on a taxable basis.

  10. The RRSP first-time home buyers plan will continue to be available. Currently allowed to withdraw/borrow $35,000 from your RRSP (repayable over 15 years).

Certainly, this will be an excellent investment option for children and grandchildren—and we would be more than happy to help your family plan how to benefit from this new account.

As more details come available, we will pass them on. In the meantime—please share the above info with anyone whom you think might benefit!

-Your Creed Capital Management Team

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