A boost from the government to help your employees buy their first home

As of April 1, 2023, the federal government will introduce the Tax-Free First Home Savings Account (FHSA) to help Canadian residents age 18 to 71 save a downpayment for their first home. To be eligible, they must be Canadian residents who have not owned homes and haven’t lived with a spouse or common-law partner who owns a home during the part of the year before the FHSA is opened or in the preceding four years.

Like RRSPs, contributions to FHSAs will be tax-deductible, and like TFSAs, any gains and withdrawals will not be taxed. The FHSA will therefore be the only savings vehicle to combine the benefits of both RRSPs and TFSAs, making it highly tax-efficient. Unlike the Home Buyers’ Plan (HBP), the FHSA doesn’t have to be paid back. If the individual never buys a home, the amounts accumulated could be transferred to their RRSP without any tax implications, which means they don’t need to have contribution room available. Finally, people can combine the FHSA and the HBP to buy their first home.

They can contribute up to $8,000 annually starting in 2023. They can also carry over their unused contribution room from the previous year, as long as they had a FHSA in that year. The maximum lifetime contribution is $40,000. The amount that they can withdraw tax-free to buy a first home includes any returns on contributions. The account must be closed at the end of the year in which the earliest of these events occurs: the year following the first withdrawal, the 15th anniversary of the individual first opening the account, or the individual’s 71st birthday. For more information, see this reference on the FHSA.

Normandin Beaudry is doing its part by:

• Influencing the market so FHSAs are offered through group savings plans so employees can take advantage of more affordable management fees under their plan
• Offering to integrate FHSAs into its clients’ savings plans to give their employees greater flexibility

Organizations that want to stand out may want to:

• Talk to a Normandin Beaudry expert about FHSAs to find out how to include this new, tax-efficient savings vehicle in their total rewards.
• Offer the option of contributing to FHSAs through payroll deductions so employees can save faster
• Educate their employees about the advantages of FHSAs to improve their financial well-being

We believe that insurers should:

• Give organizations the option of offering group FHSAs before employees open individual accounts with higher management fees
• Help integrate the various savings vehicles used in the Savings Highway^® to offer employees greater flexibility

Normandin Beaudry’s savings consultants would be happy to talk to you about this new savings vehicle and will keep you informed about trends that affect savings plan flexibility. The FHSA adds another lane to the Savings Highway®: Use it to stand out on the employment market!

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If you have any questions, contact your Normandin Beaudry consultant or email us.