In its 2022 Budget, the Canadian Federal Government announced the creation of a new type of registered plan called a Tax-Free First Home Savings Account (FHSA). This plan will allow many people who are saving to purchase a home to do so in a more tax-efficient fashion.
The new registered plan should give prospective first-time home buyers the ability to save up to $40,000 on a tax-free basis. Like a Registered Retirement Savings Plan (RRSP), contributions should be tax-deductible, and withdrawals to purchase a first home—including from investment income—should be nontaxable, like a Tax-Free Savings Account (TFSA). The annual contribution limit, starting in 2023, should be $8,000. [i]
To open an FHSA, an individual must be a resident of Canada and at least 18 years of age. In addition, an individual must be a first-time home buyer, meaning that they have not owned a home in which they lived at any time during the part of the calendar year before the account is opened, or at any time in the preceding four calendar years.
Pembroke plans to offer FSHA at some point after the legislation comes into effect on April 1, 2023. We cannot be more specific on the launch date at this time, as the details have not yet been finalized.
If you or other members of your family qualify, you should consider funding an FHSA in 2023 due to the tax characteristics that will be advantageous for most investors. We will provide an update in a future issue of Perspectives.
[i] Source: Department of Finance, Government of Canada website.
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Disclaimer
This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.
