Minister of Immigration, Refugees and Citizenship Canada, Marc Miller, announced on August 11 that the new tax-free First Home Savings Account is available and assisting in putting home ownership back into the realm of affordability for Canadians across the country.
This policy has been implemented largely in response to the steadily escalating housing prices in Canada, which are a combined product of the acute labour shortage in the field of construction and the unprecedented immigration influx that has been witnessed by the country in the recent past.
“Canadians can now reach their goal of home ownership more quickly through the tax-free First Home Savings Account,” shared Miller.
“In combining measures that help put home ownership within reach, like the First Home Savings Account, with a strategic and economic immigration approach, the Government of Canada is making housing more affordable and bringing in the skilled workers required to build more homes.”
As per the IRCC website, the new tax-free First Home Savings Account is a registered savings account, helping first-time home buying Canadians by contributing a maximum of $8,000 per year (and up to a lifetime limit of $40,000) for their first down payment within 15 years.
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First Home Savings Account contributions are tax-deductible on annual income tax returns, much like a Registered Retirement Savings Plan (RRSP).
Like a Tax-Free Savings Account, withdrawals with the aim of purchasing a first home, including any investment income on contributions, are non-taxable. “Tax-free in; tax-free out.”
Financial institutions have been offering the First Home Savings Account since April 1, and it is now available at seven financial institutions; according to IRCC, more institutions are looking to offer the service in question soon.
The First Home Savings Account can be coupled with the Home Buyers’ Plan, which allows Canadians to withdraw a maximum of $35,000 from their RRSPs to buy or build a qualifying home for themselves or for a relative with a disability.
Amounts withdrawn under the Home Buyers’ Plan need to be recontributed to an RRSP on a non-deductible basis, over no more than 15 years.
The First Home Savings Account is an add-on to the federal government’s work to accelerate housing construction and make homes more affordable for Canadians. Directly quoting from the IRCC website, this plan includes:
- a 2-year restriction on non-resident, non-Canadians purchasing residential property. This would stop speculation and help ensure that Canadians are able to make houses their homes, rather than foreign investors using houses as financial assets
- a 1% annual underused housing tax on the value of non-resident, non-Canadian owned residential property that is vacant or underused
- ensuring that profits made from flipping properties that have been held for less than 12 months are taxed “fully and fairly”
- doubling the First-Time Home Buyers’ Tax Credit to provide up to $1,500 in direct support to home buyers to offset expensive closing costs involved in buying a first home
- a new, refundable multigenerational home renovation tax credit, to provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability. This would be implemented from this year on
- applying the goods and services tax / harmonized sales tax to all assignment sales of newly constructed or substantially renovated residential housing to help address speculative trading in the housing market
- launching the new $4 billion Housing Accelerator Fund to remove local zoning barriers and incentivize housing construction, with the goal of creating at least 100,000 net new homes across Canada
- launching a $200 million stream under the Affordable Housing Innovation Fund to develop and scale up rent-to-own projects
- launching a third round of the Rapid Housing Initiative, which is providing $1.5 billion to create 4,500 new affordable housing units for Canadians in severe housing need, with 25% of investments going to housing projects targeted towards women
- delivering over $500 million towards the government’s goal of ending chronic homelessness through Canada’s Homelessness Strategy, Reaching Home
- delivering a top-up to the Canada Housing Benefit in December 2022, which provided low-income renters with a $500 payment to help with the cost of housing
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While the First Home Savings Account is aimed at resolving the issue of housing affordability, the Government of Canada is also looking to resolve the issue faced by homebuilders – that of hiring more workers for construction work.
“With provinces needing workers to meet housing demands and the home building sector facing immense challenges in acquiring talent, it is crucial for immigration to be factored into the overall approach, as newcomers are an undeniable part of the solution,” said Miller regarding the latter problem at hand.
In line with the same, IRCC has:
- increased the number of workers holding homebuilding occupational experience eligible for permanent residence through the Express Entry
- held a “first-ever” trades-specific Express Entry draw on August 3, 2023, inviting 1,500 candidate with experience in trades occupations to apply for a Canadian PR
The Canadian federal government is addressing large labour shortages in the homebuilding department by turning to immigration.
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