The federal government is introducing a Tax-Free Savings Account (TFSA) where first-time buyers could save a portion of their down payment tax-free.
The measure, introduced in the 2022 federal budget, would work much like the TFSA, which allows for tax-sheltered investing. People would be able to deposit a maximum of $8,000 per year to a maximum of $40,000 per person. The measure would come into effect as early as 2023.
In order to open a TFSA real estate account, the person would have to be a "first time buyer". By definition, they would not already own a property or have owned a property in the five years prior to opening the account. Canadians would be allowed to open this type of account only once, to avoid having someone use it repeatedly on a regular basis.
However, the government is counting on the fact that saving $40,000 takes time, so the time horizon for collecting the money would be between five and ten years after the sale of a previous property.
The Real Estate TFSA will also have a maximum term. Fifteen years after opening, the owner will have to close the account even if he or she has not yet purchased a property.
"When house prices go up, so does the cost of building equity," the government explains in its budget document. This is a major barrier for those looking to buy a home, especially young people."
Purchase for two
A couple could accumulate $80,000 plus investment earnings within the TFSA Real Estate. Both the amounts deposited and the income and withdrawals are tax-free.
If one of the couple is or was a homeowner, only the non-homeowner would be able to use the TFSA real estate account.
The federal government estimates that this measure will provide $725 million in support to homebuyers across the country over a five-year period.
Source : Article by Charles POULIN on the lesaffaires.com on the 7th april of 2022
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