Many Canadians say they may buy a home in 2024. If you are planning on being a first time home buyer in 2024, here are the top three tax incentives/strategies you should consider.
1.) (FHSA) First home savings account– First launched in 2023, FHSA is a registered savings plan that allows you to save $8,000 per year, up to a total of $40,000 lifetime limit on a tax free basis to put towards the purchase of your first home in Canada. The FHSA is a best feature combination of an RRSP being a tax deductible contribution, and the best feature of a TFSA, where you can benefit from tax free withdrawal of all contributions, including income and growth in the account. FHSA is available to residents of Canada and must be 18 years of age. Here is a link to information on the FHSA https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html
2.) (HBP) Home Buyers’ Plan– The federal HBP allows a first time home buyer to withdraw $35,000 from their RRSP to put towards the purchase, or construction of a new home without tax penalties. The key piece to the HBP is the amount withdrawn from your RRSP, must be repaid over a maximum of 15 years, starting in the next calendar year. There are some definitive rules around the HBP, especially the repayment of the funds, here is a link to more information https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html
If you are liking both the above strategies, wait, it gets better! How about using both strategies, FHSA and the HBP towards buying your first home! This means you can contribute the $40,000 to your FHSA and participate in the HBP by withdrawing $35,000 from your RRSP, you have access to $75,000 of tax free savings, plus any growth or income on the FHSA contributions. More exciting is both you and your spouse/partner can participate in both plans, for a potential $150,000 of tax free funds(plus income/growth) towards buying your first house. This is very exciting for young Canadians, a real incentive to start saving, especially taking advantage of the FHSA.
3.) (HBA) Home Buyers’ Amount– Better than nothing, when you file your personal income tax return for the calendar year in which you bought your first home, you can claim the HBA, a non-refundable tax credit of $1,500. Here is a link to more information https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31270-home-buyers-amount.html
Start saving now, the FHSA can be a real game changer for young Canadians.