Saving for a down payment? Here’s a look at the accounts that can help you
Global News
The number of investment savings accounts for Canadians looking to buy their first home can seem daunting. Experts say each have their advantages - and limits.
TFSAs. RRSPs. And now FHSAs.
The alphabet soup of investment savings accounts for Canadians looking to buy their first home can seem daunting. Experts say each have their advantages – and limits.
The tax-free first home savings account (FHSA), unveiled by the federal government in its budget earlier this month, offers a new way for aspiring owners to make a down payment on their first property.
Available starting next year, it aims to combine the advantages of the existing tax-free savings account (TFSA) and the registered retirement savings plan (RRSP).
Contributions to an FHSA will be tax-deductible, like with an RRSP. Withdrawals from an FHSA, including capital gains, to buy a home will be non-taxable – similar to a tax-free savings account.
“It’s almost like a hybrid between the two, but on steroids,” said Tim Cestnick, a tax and personal finance expert and CEO of Our Family Office Inc.
First-time homebuyers can tuck away up to $8,000 in that savings account annually – unused contribution room cannot be rolled over to the next year – with a lifetime cap of $40,000.
“The first home savings account is going to be the better plan for the majority of people,” Cestnick said.
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