The FHSA would allow first-time buyers to save up to $ 40,000 – with contributions limited to $ 8,000 per year – for home purchases on registered accounts that combine some of the tax benefits of registered savings plans (RRSP) and savings accounts. Some who praised the new measure as a powerful savings tool still note that even Canadians who can maximize bills probably will not have enough to qualify for home purchases in some of Canada’s most expensive markets, where home appraisals exceed the $ 1 million average, which requires a minimum down payment of 20 percent. Others have a vague view of the FHSA, saying that creating a brand new account instead of modifying existing ones is unnecessarily cumbersome. Jason Pereira, a financial planner at Woodgate Financial in Toronto, called the FHSA a “vanity project.” Ottawa, he argued, could simply add $ 40,000 to the RRSP contribution room and make withdrawals corresponding to that amount for tax-free first home purchases. A tax-free savings account for new home buyers is coming. What you need to know Creating a new type of registered account is costly and complicated for financial institutions, he said, adding that many may not be able to meet the government’s goal of having the FHSA available by 2023. As with an RRSP, contributions to an FHSA will be tax deductible. At the same time, eligible withdrawals from the account will be tax-free, such as those from a TFSA. As described in the budget: “Tax-free entry, tax-free”. Any increase in investment within the account would also be tax-free. It was these characteristics that led James Laird, co-founder of financial product comparison site Ratehub.ca and president of CanWise Financial real estate brokerage, to call the bill the “most important” housing measure introduced in the latest budget. “It’s a very powerful tax-free vehicle that will really help Canadians trying to save on a down payment,” Laird said in an e-mailed statement Thursday. Also important is the fact that there are no repayment obligations for first-time home buyers withdrawing from the FHSA for home purchases, said Jamie Golombek, CIBC’s chief tax and real estate consultant. Once a home buyer took the money and bought a property, he would simply close the account within one year of the first withdrawal and could not open another FHSA. Unused savings left in an FHSA after 15 years could be transferred to an RRSP or a registered pension fund (RRIF). Otherwise, taxes will apply for any withdrawals. The FHSA is fundamentally different from the Home Buyer Plan (HBP), which currently allows Canadians to withdraw up to $ 35,000 from an RRSP to buy or build a home. While HBP withdrawals are tax-free, homeowners must return the money to their RRSPs for 15 years. Otherwise, these withdrawals become taxable income. Account holders permanently lose the corresponding contribution room. With HBP, “you’re basically borrowing money from yourself,” Mr Golombek said. With the FHSA, “you really put money aside for a down payment and you can put it aside on a pre-tax basis.” But the new tax-free bill would only help those who have money to invest, Mr Golobek added. “If you do not have the money, it will do you no good.” “Even a couple with a combined $ 80,000 FHSA contribution and some investment increase would not come close to having an advance of more than $ 200,000, which is usually required to buy real estate in cities like Toronto and Vancouver,” he said. Laird. However, the FHSA will continue to serve home buyers in low-cost markets, he said. In Calgary, for example, Ratehub estimates that an average home in the city of $ 484,000 would require a minimum down payment of $ 5,200. In Halifax, where the average home price is $ 459,200, the minimum down payment will be $ 22,960. Mr Pereira also noted that the FHSA in its current form would probably invite uses that are not what the government intended. This is partly due to eligibility requirements. Anyone opening an FHSA must be a resident of Canada at least 18 years old. And they should be able to prove that they either did not live in a house they owned in the year they created the account, or in any of the previous four calendar years. These parameters, combined with the ability to ultimately transfer funds to an RRSP or RRIF, mean that non-homeowners Canadians could use the FHSA as an additional way to save and invest dollars before taxes, Pereira said. (But FHSA funds added to an RRSP or RRIF will be taxed upon withdrawal.) The details provided in the federal budget do not specify the obligation to use FHSA contributions to purchase housing. Also, as with an RRSP, the size of a tax deduction for an FHSA levy is tied to income, Pereira said. For new home buyers who have not yet reached the peak years and are in a lower tax range, the benefit of the discounts will be limited compared to the benefit for those with a higher income, he noted. And a typical first-time homebuyer hoping to buy a property as soon as possible will have a short time frame for investing in an FHSA. “Can they put it in a 100 percent equity fund and overcome instability for 20 years? Absolutely not “, said Mr. Pereira. It would be prudent for someone hoping to buy a home in a few years to invest in low-risk investments, Pereira added, which tend to have lower returns and offer limited benefits for the tax-free development of composite materials. The bottom line, Mr. Pereira argued, is that an FHSA “allows you to save more money so you can basically enter the market faster.” It does not make homes more affordable – and, in fact, it can do the opposite, fueling buyer demand and further raising housing prices, he said. Your time is precious. 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