Ottawa's new Tax-Free First Home Savings Account is coming: What you need to know

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Ottawa's new Tax-Free First Home Savings Account is coming: What you need to know
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Ottawa's new Tax-Free First Home Savings Account is coming - here's what you need to know — via financialpost realestate

The FHSA is expected to launch at some point in 2023, so here’s a guide to what we know so far to help get you prepared.This new registered plan gives prospective first-time homebuyers the ability to save $40,000 on a tax-free basis towards the purchase of a first home in Canada.

Eligible individuals will be able to contribute $8,000 annually, up to a $40,000 lifetime contribution limit. There’s a one-per-cent per-month penalty tax for any overcontributions. The annual contribution limit will apply to those made within a particular calendar year. Unlike RRSPs, contributions made within the first 60 days of a subsequent year can’t be deducted in the current tax year.

Like RRSP contributions, you won’t be required to claim the FHSA deduction in the tax year in which a contribution is made. The amount can be carried forward indefinitely and deducted in a later tax year, which may make sense if you expect to be in a higher tax bracket in a future year. Individuals will be able to transfer funds from one FHSA to another FHSA, or to an RRSP or a RRIF, all on a tax-free basis.Article content

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