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New Tax-Free First Home Savings Account Aims to Help Young Canadians Buy Their First Homes
As house prices continue to soar, the prospect of saving for a down payment on a home has become an elusive dream for many Canadians, especially the younger generation. Last week, the Honourable Marc Miller, Minister of Immigration, Refugees, and Citizenship, announced different measures to support Canadians.
The First Home Savings Account, launched on April 1, 2023, is one of the main supports offered to Canadians. It is currently being offered by 7 financial institutions, with additional institutions expected to introduce the account shortly. This initiative is proving to be a crucial step in the dream of homeownership for people all across the country.
Benefits of the Tax-Free First Home Savings Account
The tax-free First Home Savings Account is a registered savings plan tailored to empower Canadians aiming to become first-time home buyers. Individuals can contribute up to $8,000 annually (capped at a lifetime total of $40,000) for 15 years, specifically for their initial down payment. To facilitate progress toward savings objectives, contributions made to the First Home Savings Account are eligible for tax deductions. This will be on yearly income tax filings, similar to the provisions of a Registered Retirement Savings Plan (RRSP).
As outlined on the government website: “Like a Tax-Free Savings Account (TFSA), withdrawals to purchase a first home—including any investment income on contributions—are non-taxable. Tax-free in; tax-free out.” This means that withdrawals from the account, including any earnings from investments on contributions, are exempt from taxation. Essentially, what goes in is tax-free, and what comes out remains tax-free.
A Comprehensive Plan for Housing and Labor Growth in Canada
This new approach to savings is just one facet of a comprehensive strategy. As Immigration Minister Marc Miller highlighted in his announcement on August 11. Where he outlined the importance of other essential aspects to support this initiative. Both of them from the perspective of the labour force and immigration. Acknowledging the need to not only address housing affordability but also support the construction industry’s workforce, the Government of Canada needs to promote a dual approach:
-Enhanced Opportunities for Workers: The Immigration, Refugees, and Citizenship Canada (IRCC) has broadened eligibility criteria for permanent residency through the Express Entry system. This was achieved by particularly targeting workers with expertise in homebuilding occupations.
-Revolutionary Draw for Skilled Workers: Marking a milestone on August 3, 2023, the IRCC conducted the first-ever trades-specific Express Entry draw. This unique draw extended invitations to 1,500 candidates possessing experience in trades occupations, inviting them to apply for permanent residency in Canada.
Through these comprehensive measures, the federal government is taking proactive steps to bridge crucial gaps in the labor shortage. Providing mortgage support, while simultaneously attracting the talent required to expedite the home construction process. The tax-free First Home Savings Account, coupled with innovative immigration strategies, signifies Canada’s commitment to fostering homeownership aspirations and bolstering the nation’s housing sector.
Buying a Home in Canada as a Newcomer
With the law implemented in January of 2023, that stops non-Canadians from buying homes, newcomers are also worried about owning homes in Canada. This rule will be around for 2 years, but there are exceptions. Foreign investors can’t buy regular homes, but they can still get vacation homes or homes outside big cities. Also, if you’re from another country and you’re married to a Canadian or living together, you might still buy a home even if things change like a divorce.
But there are still some options for newcomers wanting to buy a house in Canada. If you have a valid study or work permit, you might still be eligible to get home. Even with this new law, you could buy a property as long as you plan to stay. Students who follow some rules can buy homes, as well as people with work permits who’ve been here a while. But, it’s important to know that not all places in Canada have homes for less than $500,000. In conclusion, as a new immigrant, you have options even if you’re not a Canadian citizen or permanent resident.
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