The Feds Want To Introduce A Tax-Free Savings Account For Potential First-Time Home Buyers
The Tax-Free First Home Savings Account would let first-time home buyers save up to $40,000.
The federal government wants a tax-free savings account for housing that would be available to potential first-time homebuyers to be introduced next year.
As part of the federal government's housing commitments in Budget 2022, which was released on April 7, it was proposed that the Tax-Free First Home Savings Account is expected to be created.
The bank account would give prospective first-time home buyers the ability to save up to $40,000.
Like a Registered Retirement Savings Plan (RRSP), contributions to the Tax-Free First Home Savings Account would be tax-deductible.
Also, withdrawals from the account to purchase a first home — including investment income — would be non-taxable just like a regular Tax-Free Savings Account (TFSA).
The federal government said it plans to work with financial institutions to ensure that a Tax-Free First Home Savings Account could be opened and contributed to by Canadians starting in 2023.
It's estimated that the Tax-Free First Home Savings Account would provide $725 million in support over five years.
In a tweet about the new federal budget, Justin Trudeau said that his government is investing in housing, making the housing market fairer and helping young people save for their first home.
Minister of Finance and Deputy Prime Minister Chrystia Freeland tweeted, "We need housing that is affordable for everyone, and investments that ensure an entire generation is not priced out of owning a home."
Budget 2022 also had other proposed help for first-time homebuyers including the doubling of the First-Time Home Buyers' Tax Credit and the extension of the First-Time Home Buyer Incentive.
According to statistics from the Canadian Real Estate Association, the national average home price in Canada was a record-breaking $816,720 in February 2022, a more than 20% difference from the same month in 2021.
Canada's national average price is "heavily influenced" by sales in Greater Vancouver and the Greater Toronto Area.