'First Home Savings Plan' - Update | General financial discussion | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

No permission to create posts
sp_Feed Topic RSS sp_TopicIcon
'First Home Savings Plan' - Update
February 9, 2023
4:04 pm
Dean
Valhalla Mountains, British Columbia
Member
Members
Forum Posts: 1872
Member Since:
January 12, 2019
sp_UserOfflineSmall Offline

.
When the new FHSP comes into effect (~ April) I'm sure it won't apply to most of us here. But like myself, some of us will have family members and young friends who may be able to take advantage of this new plan.

BNN vid link ➡ https://www.bnnbloomberg.ca/investing/video/there-s-no-downside-to-the-tax-free-first-home-savings-account-fhsa-jamie-golombek~2625779

It's too bad the limits are so low ($8K / $40K), but the upside is ... it's 'Tax-Free' at both ends.

    Dean

.
P.S.
And in related news . . .
The First-time home buyer's Tax Credit amount
has increased to $10,000 for a qualifying home
purchased after December 31, 2021.

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

February 9, 2023
5:21 pm
mordko
Member
Members
Forum Posts: 644
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

The limits seem high enough, given how super generous this scheme really is. A couple pays zero tax on 80K (say a $40K handout) AND never has to pay a dollar in taxes on investment returns.

Anyone eligible should be “at the ready” to get in on the deal the moment its available.

February 10, 2023
6:22 am
RetirEd
Member
Members
Forum Posts: 951
Member Since:
November 18, 2017
sp_UserOfflineSmall Offline

This pisses me off. Not only does it reward the richer folk who can afford to purchase real estate, it will continue the trend toward policies pushing housing prices ever higher. The tax benefit is reduced or nonexistent for lower-income taxpayers. Is this the REIT lobby laughing all the way to the bank?
RetirEd

RetirEd

February 10, 2023
4:39 pm
Dean
Valhalla Mountains, British Columbia
Member
Members
Forum Posts: 1872
Member Since:
January 12, 2019
sp_UserOfflineSmall Offline

mordko said

The limits seem high enough, given how super generous this scheme really is. A couple pays zero tax on 80K (say a $40K handout) AND never has to pay a dollar in taxes on investment returns.

Anyone eligible should be “at the ready” to get in on the deal the moment its available.  

Well hush my mouth ... you're right ❗

A couple's 'combined' contribution limits would be $16K/Yr and $80K total. And add to that the earnings in the plan over the years, and that would make for a rather sweet downpayment ... all Tax Free. sf-laugh

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

October 15, 2023
2:58 pm
Nelson
Member
Members
Forum Posts: 8
Member Since:
January 6, 2020
sp_UserOfflineSmall Offline

Which financial institutions are currently offering the FHSA? Best to go with ones offering the highest rates.

October 15, 2023
3:42 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 4190
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

Nelson said
Which financial institutions are currently offering the FHSA? Best to go with ones offering the highest rates.  

EQ Bank has an FHSA, as does Questrade and, perhaps, Questwealth Portfolios, too. Some robo-advisors may also have them. Scotiabank has an FHSA, as does RBC Royal Bank. I see BMO Bank of Montreal's does not launch until November. For me, I went with a Scotiabank FHSA, mainly so I could get the tax deduction; less so for the tax-free growth, even though I'll only get to use $8,000-16,000 of it until my studio condo purchase closes. They are offering 5.0% through January 31, 2024. They said Scotia iTRADE will launch an FHSA by year-end.

That said, I agree mostly with RetirEd that it's highly gimmicky. sf-cool

Cheers,
Doug

October 15, 2023
3:48 pm
friskyib
British Columbia
Member
Members
Forum Posts: 117
Member Since:
August 29, 2023
sp_UserOfflineSmall Offline

It looks good for the younger crowd for sure.

o What happens if not used for purchase of a home?
o What is a home....double wide trailer and up?
o Are luxury homes included? (Or anything priced abnormally high compared to the average of the community)
o What can you invest in?
o Is there a penalty, if over investing?
o How much occupancy time is required before you sell?
o Is it a one time only option?
o Then who will be offering it?

I remember my first home purchase. It was a new home.
$6,000 down
$1000 saved
$5000 on a Government of BC second mortgage. (Or $1000.00 cash and no pay back). We felt that there was better value from the second mortgage.
I believe payments on second mortgage were $50 a month and pay 11 months with no defaults the 12 month was forgiven.
How many years was it.....not sure.
3 years later we moved and paid it out from the proceeds of sale.
It sure helped us to get into the market and be able to move up.

October 16, 2023
4:00 pm
Nelson
Member
Members
Forum Posts: 8
Member Since:
January 6, 2020
sp_UserOfflineSmall Offline

If you decide not to purchase a home with the money in your FHSA (maybe you've inherited a house, decided to rent instead, etc.), the funds can be transferred into an RRSP or an RRIF without penalty or affecting your contribution room. In opening an FHSA, you could create $40,000 max in RRSP contribution room. Another tax-shelter worth considering, providing you meet the definition of a first-time home buyer. Will there be a chart in the future listing the financial institutions offering the FHSA and their posted rates?

October 17, 2023
6:42 am
Alexandre
Member
Members
Forum Posts: 1011
Member Since:
November 8, 2018
sp_UserOfflineSmall Offline

Nelson said
If you decide not to purchase a home with the money in your FHSA, the funds can be transferred into an RRSP or an RRIF without penalty or affecting your contribution room.

Exactly!
This is what I told my sister, who never owned a house and does not plan to. She didn't think at first FHSA will benefit her. She already maximizes RRSP contributions.

I help my sister do her taxes, so I ran numbers through TurboTax and she'll be getting extra $2,500 from the government after contributing $8,000 to FSHA this year. Multiply that by 5 years and it is nice chunk of money.
Needless to say, she did open FHSA after that.

October 17, 2023
10:41 am
everhopeful
Member
Members
Forum Posts: 70
Member Since:
September 28, 2023
sp_UserOfflineSmall Offline

Nelson said
If you decide not to purchase a home with the money in your FHSA (maybe you've inherited a house, decided to rent instead, etc.), the funds can be transferred into an RRSP or an RRIF without penalty or affecting your contribution room.

This is a great bonus to an FHSA, but IMO this makes the program too enticing for homeowners to try and cheat the program to bulk up their RRSPs.

October 17, 2023
1:00 pm
Alexandre
Member
Members
Forum Posts: 1011
Member Since:
November 8, 2018
sp_UserOfflineSmall Offline

everhopeful said
This is a great bonus to an FHSA, but IMO this makes the program too enticing for homeowners to try and cheat the program to bulk up their RRSPs.  

FHSA is for first time home buyer, with some exceptions. If you are a homeowner, most likely you would not be eligible for FHSA.

Fun fact. As I read definition of "first-time home buyer" for the purpose of FHSA, it appears to me that a person who spent last 4+ years in prison and recently released will be allowed to open FHSA. Even if they own a house.

October 17, 2023
6:07 pm
Dennis
Member
Members
Forum Posts: 84
Member Since:
January 23, 2013
sp_UserOfflineSmall Offline

Hello,
I'm confuse with FHSA contribution room. I thought it use/share the same RRSP room but it seem I was wrong.

So does anyone has same extra 8k/40k FHSA contribution room/limit regardless of their RRSP room?

For example, if I 5k RRSP room this year, I can contribute 5k to RRSP and 8k to FHSA and claim both? And that is same effect as total 13k RRSP contribution claim even though I had only 5k room.

October 17, 2023
8:24 pm
everhopeful
Member
Members
Forum Posts: 70
Member Since:
September 28, 2023
sp_UserOfflineSmall Offline

Alexandre said
FHSA is for first time home buyer, with some exceptions. If you are a homeowner, most likely you would not be eligible for FHSA.

Do applicants have to prove they are not a homeowner before buying? Is there a registry of homeowners/addresses that the program has to cross-check against? I really dont want to see another program misused, and I don't have much confidence that this program will only be used for first home down payments.

October 17, 2023
8:28 pm
everhopeful
Member
Members
Forum Posts: 70
Member Since:
September 28, 2023
sp_UserOfflineSmall Offline

Dennis said
So does anyone has same extra 8k/40k FHSA contribution room/limit regardless of their RRSP room?

Yes, this is all in addition to RRSP room! It has the benefits of an RRSP on contribution, and TFSA on withdrawal if used for a down payment. Which will really help home buyers. If not used in 15yrs from opening, it will be merged into RRSP - which I predict more FHSAs will go this route than to down payments.

October 18, 2023
4:34 am
RetirEd
Member
Members
Forum Posts: 951
Member Since:
November 18, 2017
sp_UserOfflineSmall Offline

Naturally, this will provide most of its benefit to those in the higher marginal tax rates. And continue to bid up housing costs, both for purchase and rental (since the owner will have overpaid for the place).

Then the holder will be able to escape withdrawal taxation when exiting to purchase property.

Everything that subsidizes home purchases just drives up the costs and associated debt, unless the shortage abates.

RetirEd

October 18, 2023
7:41 am
Alexandre
Member
Members
Forum Posts: 1011
Member Since:
November 8, 2018
sp_UserOfflineSmall Offline

RetirEd said
Everything that subsidizes home purchases just drives up the costs...  

You might get back extra $4,000 from FHSA contribution in a year if you are in the high tax bracket. Most will get less than $2,500. Have you checked real estate prices lately? For a mortgage on a mediocre house in a half-decent neighborhood, $2,500-$4,000 is not even a drop in the backet.

Besides, most will either dismiss FSHA as a gimmick it is, or use it as an extra RRSP contribution room.
Waiting 5 years to collect about $12,000 in extra tax refunds before buying a house? Right...

October 18, 2023
7:51 am
Dennis
Member
Members
Forum Posts: 84
Member Since:
January 23, 2013
sp_UserOfflineSmall Offline

everhopeful said

Dennis said
So does anyone has same extra 8k/40k FHSA contribution room/limit regardless of their RRSP room?

Yes, this is all in addition to RRSP room! It has the benefits of an RRSP on contribution, and TFSA on withdrawal if used for a down payment. Which will really help home buyers. If not used in 15yrs from opening, it will be merged into RRSP - which I predict more FHSAs will go this route than to down payments.  

Thank you

October 18, 2023
12:05 pm
mordko
Member
Members
Forum Posts: 644
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

Alexandre said

You might get back extra $4,000 from FHSA contribution in a year if you are in the high tax bracket. Most will get less than $2,500. Have you checked real estate prices lately? For a mortgage on a mediocre house in a half-decent neighborhood, $2,500-$4,000 is not even a drop in the backet.

Besides, most will either dismiss FSHA as a gimmick it is, or use it as an extra RRSP contribution room.
Waiting 5 years to collect about $12,000 in extra tax refunds before buying a house? Right...  

You are missing tax-free growth of capital and the dividends. Nor am I sure where “most” would fall on the tax scale.

Apparently the point of this remarkable tax handout / break isn’t lost on “most” eligible individuals. Banks are reporting that the early uptake has been “phenomenal”.

Anecdotally, both of my sons and their partners have maxed their contributions. They are young, with decent salaries. My (conservative) estimate is that each couple will have north of 100K in these accounts in 5 years. Its a nice incentive to buy a house. They might not wait 5 years if house prices drop… Who knows?

October 18, 2023
1:25 pm
Alexandre
Member
Members
Forum Posts: 1011
Member Since:
November 8, 2018
sp_UserOfflineSmall Offline

mordko said

Anecdotally, both of my sons and their partners have maxed their contributions. They are young, with decent salaries. My (conservative) estimate is that each couple will have north of 100K in these accounts in 5 years. Its a nice incentive to buy a house.

$80K of that money is what they deposited over the course of 5 years. So, it is an extra $20K from capital gain, and out of that money only tax part is their gain vs. non-FHSA, which is probably close to just $6K. For 5 years. For two people.

Maybe it is really all about psychological factor: 5 years from now that couple will look at their $100K FHSA account and say "It's a nice incentive to buy a house."
Even if $94K of that money was their without an FHSA.

October 18, 2023
5:37 pm
mordko
Member
Members
Forum Posts: 644
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

Alexandre said

mordko said

Anecdotally, both of my sons and their partners have maxed their contributions. They are young, with decent salaries. My (conservative) estimate is that each couple will have north of 100K in these accounts in 5 years. Its a nice incentive to buy a house.

$80K of that money is what they deposited over the course of 5 years. So, it is an extra $20K from capital gain, and out of that money only tax part is their gain vs. non-FHSA, which is probably close to just $6K. For 5 years. For two people.

Maybe it is really all about psychological factor: 5 years from now that couple will look at their $100K FHSA account and say "It's a nice incentive to buy a house."
Even if $94K of that money was their without an FHSA.  

Capital gain and dividends. And, of course, its the gains and dividends on tax deductions too. Otherwise these would have been with CRA rather than invested. And once they buy houses, capital gains in the house are also tax free. Life time tax-free gains will be quite something.

I think its a stunning deal; contrary to the whole ideology of tax perks. Combines the best features of TFSA and RRSP. A massive incentive to buy rather than rent. $94K wouldn’t have been there without FHSA, no. One has to assume that FHSA tax deductions also get invested in something nice; perhaps within a TFSA wrapper. FHSA expands the overall amount a middle class couple can shelter from tax in a doubly advantageous way.

No permission to create posts

Please write your comments in the forum.