Canadians pinching their pennies to buy a first home are getting a break from the federal government.
April 1 marks the launch of the First Home Savings Account ; a savings vehicle with the combined tax perks of a Registered Retirement Savings Plan and a Tax-Free Savings Account .
After withdrawing money from an FHSA, you must purchase a home by October 1 of the following calendar year or it will be taxed as income. If it is not used for a home purchase by the age of 40, it can be converted to normal RRSP savings.Forty thousand dollars is well above the five per cent minimum down payment required on a house under $500,000, but there are ways to boost it by combining the alphabet soup of government registered accounts available to most Canadians.
Just about any type of investment - stocks, bonds, mutual funds - are permitted in a FHSA but the short-term nature of an FHSA calls for a short-term investment strategy. FHSAs, on the other hand, would likely have a hard deadline to liquidate investments when the opportunity to buy a home arises.
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