New First Home Savings Account launches April 1, but won’t be available until later this year
Prospective homebuyers wanting to take advantage of the federal government’s new Tax-Free Savings Account will have to wait longer, despite the program’s official launch date of April 1.
All of the Big 6 banks confirmed to CMT that they won’t be in a position to offer the new account to clients until later in the year.
The new registered plan allows first-time homebuyers to save up to $40,000 for the down payment on their home on a tax-free basis.
Similar to the Tax-Free Savings Account (TFSA), funds in the account can be placed in a variety of investment vehicles, and can then be withdrawn tax-free as long as the funds are used for a qualifying first-home purchase. And similar to a Registered Retirement Savings Plan (RRSP), contributions are tax-deductible on your income tax return for the tax year you make them in.
The account was first announced in the federal government’s 2022 budget and was promoted as being available to first-time buyers starting on April 1, 2023.
However, the country’s largest banks say they are still working to finalize the logistics of offering the account to clients, including obtaining the required government authorizations and awaiting tax reporting guidelines from the Canada Revenue Agency.
Most expect to offer the account later in the 2023 tax year.
Here are the official responses from each of the six banks, along with their FHSA pages where they will share more information once the accounts become available:
Tax-Free First Home Savings Accounts (FHSA) will be available to BMO customers including BMO Wealth clients, starting with an offer through our retail bank and wealth advisory channels for the 2023 tax year. We’ll be expanding the offer to other channels in the future and updates will be posted to BMO’s FHSA website.
“We’re working to make the FHSA available to our clients as quickly as possible after the legislation comes into effect on April 1. At this time our team is making every effort to complete the necessary technological development.”
“TD understands that saving for your first home is one of the most important financial journeys for Canadians, so we are working to ensure the FHSA has the features and benefits that Canadians need when we launch it later in 2023.”
“In the meantime, customers can visit our public webpage to learn more about it, and once the FHSA becomes available, we encourage those interested to book an appointment with a TD Personal Banker at any of our branches across the country.”
Do you have more questions about the account and how it can be used to assist with a first-time home purchase? The following are some of the key details of the program as well as its restrictions.
Who is eligible for the FHSA?
Any resident of Canada who is at least 18 years old.
Anyone who hasn’t owned a home or lived in a home owned by their spouse or common-law partner in the calendar year or four preceding calendar years.
How much can you contribute to your FHSA?
You can contribute up to $8,000 per calendar year, up to a lifetime limit of $40,000.
You can carry forward up to $8,000 in unused contributions in a calendar year to use in a later year.
What qualifies as a first home purchase?
Funds withdrawn from the account are only tax-free if they are used for a qualifying first-home purchase. To qualify, the purchase must meet the following criteria:
Be a first-time homebuyer and a resident of Canada at the time of the withdrawal and during the purchase of the qualifying home,
Have a written agreement to buy or build a qualifying home located in Canada before October 1 of the year following the year of withdrawal,
Intend to occupy the qualifying home as your principal place of residence within one year of buying or building it.
What investments are eligible within an FHSA?
The rules governing the FHSA are identical to those for Tax-Free Savings Accounts, meaning account-holders can invest in mutual funds, publicly traded securities, government and corporate bonds and guaranteed investment certificates (GICs) within the account.
What if you don’t use the funds to purchase a home?
The funds in the FHSA account must be used to purchase a first home by either the end of the 15th year after the plan was opened or by the end of the year you turn 71 years old.
At either of those points, or if you choose to use the funds for a purpose other than a first-home purchase, the unused balance can then be transferred to a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) or withdrawn on a taxable basis.
Full details of the First Home Savings Account are available from the Department of Finance here.