One of the proposed measures announced in the 2022 federal budget is set to become a reality this week. Banks can officially start offering the Tax-Free First Home Savings Account (FHSA) on April 1, according to the 2023 fiscal budget. As part of Ottawa’s robust housing plan, it aims to help Canadians save for a down payment to buy their first home.
The new registered plan gives prospective first-time homebuyers the ability to save $40,000 on a tax-free basis. The government compares it to the Registered Retirement Savings Plan (RRSP) in that contributions to the FHSA will be tax-deductible. And just like a Tax-Free Savings Account (TFSA), withdrawals to purchase a first home—including from investment income—will be non-taxable.
“Tax-free in; tax-free out,” reads the budget. The annual maximum contribution to the account is $8,000 per year. The government is estimating that the FHSA would provide $725 million in support over five years.