We will introduce a tax-free First Home Savings Account to help young Canadians afford a downpayment, faster.
Combining the features of both an RRSP and a TFSA, this plan will allow Canadians under 40 to save up to $40,000 towards their first home, and to withdraw it tax-free to put towards their first home purchase with no requirement to repay it.
This would allow young Canadians to set aside 100% of every dollar they earn, up to $40,000 toward the most important investment they will make in their life.
If the funds are not used for a home purchase by the age of 40, they convert back to normal RRSP savings.
It represents roughly 5% of the average home price in Canada ($736K)
How does it work?
Like investing in an RRSP, you are able to deduct the savings you invest from your income when it goes into your First Home Savings Account. Like investing in a TFSA, this money will be able to compound and grow tax-free until you withdraw up to a maximum of $40,000.
To ensure this supports genuine savings towards a first home and the people who need it, integrity measures will be put in place to deter tax avoidance.
Will it stay tax-free?
When you take it out to put towards a downpayment, it still stays tax-free and doesn’t get counted towards your income. Tax-free in, tax-free out.