🏠💵 Minister Miller Highlights New Tax-Free First Home Savings Account That Helps Canadians Reach Their Goals of Home Ownership Faster
Saturday, 02 September 2023 12:00.PM
As house prices have climbed, saving for a down payment is out of reach for many Canadians, particularly young people. Today, the Honourable Marc Miller, Minister of Immigration, Refugees and Citizenship, shared how the new tax-free First Home Savings Account is available and helping put home ownership back within reach of Canadians across the country.
The new tax-free First Home Savings Account is a registered savings account that helps Canadians become first-time home buyers by contributing up to $8,000 per year (up to a lifetime limit of $40,000) for their first down payment within 15 years. To help Canadians reach their savings goals, First Home Savings Account contributions are tax deductible on annual income tax returns, like a Registered Retirement Savings Plan (RRSP). Like a Tax‑Free Savings Account, withdrawals to purchase a first home, including any investment income on contributions, are non-taxable. Tax-free in; tax-free out.
Financial institutions have been offering the First Home Savings Account to Canadians since April 1, 2023, and it's now available at 7 financial institutions, with more set to offer it soon.
While the First Home Savings Account seeks to address housing affordability, it's also essential for the Government of Canada to help homebuilders hire the workers they need to put shovels in the ground. That's why IRCC has
• made more workers with experience in homebuilding occupations eligible for permanent residence through Express Entry
• held a first-ever trades-specific Express Entry draw on August 3, 2023, inviting 1,500 candidates with experience in trades occupations to apply for permanent residence in Canada
Through these measures, the federal government is addressing crucial gaps in the labour shortage, and bringing in the talent required to build homes faster.
"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. In combining measures that help put home ownership within reach, like the First Home Savings Account, with a strategic and economic immigration approach, the Government of Canada is making housing more affordable and bringing in the skilled workers required to build more homes. With provinces needing workers to meet housing demands and the home building sector facing immense challenges in acquiring talent, it is crucial for immigration to be factored into the overall approach, as newcomers are an undeniable part of the solution."
– The Honourable Marc Miller, Minister of Immigration, Refugees and Citizenship
• Through the new Express Entry category-based selection process, carpenters, plumbers, bricklayers, roofers and others involved in homebuilding will have more opportunities to apply for permanent residence in Canada and bring their skills to Canadian worksites.
• The First Home Savings Account can be combined with the Home Buyers' Plan, which allows Canadians to withdraw up to $35,000 from their RRSPs to buy or build a qualifying home for themselves or for a relative with a disability. Amounts withdrawn under the Home Buyers' Plan must be recontributed to an RRSP on a non-deductible basis over a period not exceeding 15 years.
• Here's an example of how the First Home Savings Account can help Canadians save for their first down payment and benefit from tax relief:
• Olivia and Amira are looking for a first home in Quebec. They each save the maximum $8,000 per year in their First Home Savings Account, which they can deduct from their income at tax time. They both make between $70,000 and $100,000, which means that for every $100 contributed to their First Home Savings Account, they receive $17.12 in federal tax savings, and they each receive an annual federal tax refund of $1,369.
• After 5 years of saving, Olivia and Amira have a combined $90,000 (including $10,000 in investment returns) that they can withdraw tax-free for a down payment on their first home. Over 5 years, they will have benefitted from a combined $15,400 in federal tax relief, in addition to $17,000 in provincial tax relief.
• They use their First Home Savings Account as a 10% down payment to qualify for a mortgage and purchase their first home for $900,000.
• When Olivia and Amira file their taxes after buying their first home, they will receive an additional $1,252 in federal tax relief through the First-Time Home Buyers' Tax Credit.
• The new First Home Savings Account to help Canadians save for their down payment builds on the federal government's work to accelerate housing construction and make homes more affordable for Canadians. This plan includes:
• a 2-year ban on non-resident, non-Canadians purchasing residential property to help curb speculation and ensure that houses are used as homes for Canadians to live in, rather than as financial assets for foreign investors
• a 1% annual underused housing tax on the value of non-resident, non-Canadian owned residential property that is vacant or underused
• making sure that profits from flipping properties held for less than 12 months are taxed fully and fairly
• doubling the First-Time Home Buyers' Tax Credit to provide up to $1,500 in direct support to home buyers to offset expensive closing costs involved in buying a first home
• a new, refundable multigenerational home renovation tax credit, to provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability, starting this year
• applying the goods and services tax / harmonized sales tax to all assignment sales of newly constructed or substantially renovated residential housing to help address speculative trading in the housing market
• launching the new $4 billion Housing Accelerator Fund to remove local zoning barriers and incentivize housing construction, with the goal of creating at least 100,000 net new homes across Canada
• launching a $200 million stream under the Affordable Housing Innovation Fund to develop and scale up rent-to-own projects
• launching a third round of the Rapid Housing Initiative, which is providing $1.5 billion to create 4,500 new affordable housing units for Canadians in severe housing need, with 25% of investments going to housing projects targeted towards women
• delivering over $500 million towards the government's goal of ending chronic homelessness through Reaching Home, Canada's Homelessness Strategy
• delivering a top-up to the Canada Housing Benefit in December 2022, which provided low-income renters with a $500 payment to help with the cost of housing
SOURCE: Immigration, Refugees and Citizenship Canada
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