Unveiled: The Functioning of the CELIAPP
Let's Chat about Home Savings Accounts in Canada 🎉
First-Time Home Buyer Savings Account (FTHBSA) 🏡💰 is in its third year now, and Statistics Canada has recently released some intriguing data about its usage across the nation. This article aims to shed light on this tax measure introduced to promote homeownership.
Total Contributions 📊
Statistics Canada shows that Canadians pooled together approximately 2.9 billion dollars in FTHBSAs from April to December 2023. Approximately half a million individuals participated in this scheme, with an average contribution of $5,960. Notably, more than half of the contributors contributed the max annual amount of $8,000, as mentioned by tax specialist Luc Godbout. Compare this to 2009 when 4.5 million Canadians contributed a total of 19 billion dollars to the broader Tax-Free Savings Account (TFSA).
Deductible Contributions 📈
FTHBSA is a registered account designed to help individuals save for their first property. Introduced on April 1, 2023, the account allows annual contributions up to $8,000, with a lifetime limit of $40,000. Contributions to FTHBSA are eligible for a tax deduction, similar to those made to a Registered Retirement Savings Plan (RRSP).
Equitable? 📉
A question that may arise as more data becomes available is whether this benefit will primarily benefit higher-income individuals. In the first year, 40% of contributors and 45% of contributions came from individuals with an income of $80,000 or more.
Non-Taxable Withdrawals 💸
One of the FTHBSA's generosity comes from the fact that contributions are deductible, but withdrawals are non-taxable when used as a down payment for the purchase of a first home. To qualify as a first-time homebuyer, an individual must not have owned a principal residence in the year preceding the account opening and in the four preceding years. If a property purchase does not materialize, the individual can transfer funds from an FTHBSA to an RRSP without affecting the unused RRSP contribution room.
Limited Duration ⏰
The FTHBSA continues until the earliest of:- The end of the year in which the account has been open for 15 years;- The end of the year in which the individual reaches the age of 71; or,- The end of the year following the first eligible withdrawal from the FTHBSA by the individual.
So, RRSP or FTHBSA? 🤔
- The First-Time Home Buyer Savings Account (FTHBSA), designed to promote homeownership, saw Canadians contributing approximately $2.9 billion from April to December 2023, with an average contribution of $5,960 each.
- FTHBSA, launched on April 1, 2023, is a registered account that allows annual contributions up to $8,000, with a lifetime limit of $40,000, and offers tax deductible contributions similar to those made to a Registered Retirement Savings Plan (RRSP).
- In the first year, 40% of FTHBSA contributors and 45% of contributions came from individuals with an income of $80,000 or more, raising the question of whether this benefit will primarily benefit higher-income individuals.
- One of the advantages of the FTHBSA is that withdrawals are non-taxable when used as a down payment for the purchase of a first home, making it a potentially appealing option for personal-finance and business-finance decisions related to homeownership.
