In a groundbreaking move aimed at tackling the challenges of home ownership for young Canadians, the Honourable Marc Miller, Minister of Immigration, Refugees and Citizenship, unveiled the innovative tax-free First Home Savings Account for First-Time Home Buyer Canada. With the escalating costs of housing putting dreams of owning a home out of reach for many, this initiative promises to rekindle hope for aspiring homeowners across the country.
The tax-free First Home Savings Account, a newly introduced registered savings account, seeks to make the dream of home ownership a reality. It offers Canadians an unprecedented opportunity to save up to $8,000 annually (up to a lifetime cap of $40,000) for their first down payment within a 15-year timeframe. Drawing parallels with the popular Registered Retirement Savings Plan (RRSP), contributions to this account are tax-deductible on annual income tax returns. Furthermore, similar to the Tax-Free Savings Account (TFSA), withdrawals from this account for the purpose of purchasing a first home, along with any investment income on contributions, remain entirely tax-free.
As of April 1, 2023, this pioneering program has been rolled out by seven financial institutions, with more anticipated to join the fray in the near future. By harnessing the potential of the First Home Savings Account, Canadians can leap over the daunting financial hurdle of a down payment and take a crucial step towards fulfilling their aspirations of home ownership.
Minister Miller emphasized, “Canadians can now reach their goal of home ownership more quickly through the tax-free First Home Savings Account. By opening up an account, Canadians can save up to $8,000 tax-free each year and make their money go further.” This move is part of a larger strategy that aims to address both the affordability of housing and the workforce needs of the homebuilding sector.
The First Home Savings Account dovetails with the Home Buyers’ Plan, allowing Canadians to withdraw up to $35,000 from their RRSPs for purchasing or constructing a qualifying home. These withdrawals must be recontributed to an RRSP over a non-deductible period of up to 15 years.
Minister Miller’s vision also extends to the immigration landscape. By making experienced workers in homebuilding occupations eligible for permanent residence through the Express Entry system, the government is set to bridge the labor gap and bolster the home construction industry. In a groundbreaking move, the first-ever trades-specific Express Entry draw was held on August 3, 2023, inviting 1,500 skilled trade candidates to apply for permanent residence, further reinforcing Canada’s commitment to addressing workforce shortages.
The journey of a first-time home buyer is vividly illustrated by the story of Olivia and Amira, a couple in Quebec. By stashing away the maximum annual contribution in their First Home Savings Account, Olivia and Amira—each earning between $70,000 and $100,000—stand to gain $17.12 in federal tax savings for every $100 saved. Their five-year journey accumulates to a combined $90,000 (including $10,000 in investment returns), which they can withdraw tax-free for a down payment on their first home. Their prudent planning has also yielded combined federal and provincial tax relief of $32,400. This substantial investment then becomes a 10% down payment on their $900,000 dream home, positioning them to reap the benefits of the First-Time Home Buyers’ Tax Credit.
This landmark initiative unfolds within the context of a comprehensive housing strategy. The federal government’s multifaceted plan comprises a two-year prohibition on non-resident, non-Canadian property acquisitions, a 1% annual underused housing tax on vacant or underused foreign-owned residential property, and measures to curb speculative property trading.
The introduction of the tax-free First Home Savings Account comes as a lifeline for many young Canadians, providing an accessible pathway to home ownership. By aligning it with strategic immigration policies and fostering a skilled workforce, the government aims to fortify housing affordability while concurrently nurturing economic growth and stability.
