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When it comes to money, financial planning, and working toward your financial goals, it's only natural to have questions. We can help, with answers to your wealth management questions designed to help you make more informed decisions about your money and help you decide whether we may be right for you.
All of Canada. We provide our services to Edmonton, Calgary, Vancouver, Winnipeg, Ottawa, Toronto And Surrounding Communities.
As with any service that brings value, there is a cost for the financial advice we deliver. We are transparent and believe that it is the client’s right and privilege to know exactly what they are paying for. These are some of the factors that will influence the fees you pay:
- The level and type of service you receive
- The recommended investment management solutions
- The number of your assets (or investments) managed
Expected returns are impossible to predict and out of your (and our) control. We prefer to focus on things we can control: fees, diversification and emotions. The stock market will take care of returns over the long term. The key is to stay disciplined and stick to your strategy in order to build wealth.
Of all the questions we get, this one's the toughest to provide a one-size-fits-all answer. Which type of account you should choose depends on three factors: How much you earn now; How much you'll likely earn in the future; And whether you'll need to access the money before you retire.
In a perfect world, you would max out both your RRSP and TFSA. RRSP contributions will lower your tax burden right now, which is great. At retirement age, on the other hand, you'll be able to withdraw from your TSFA without being taxed on your decades of gains, which is also pretty nice. But the world is not perfect — melted ice cream is not a slimming breakfast drink, and most of us don't make enough to put that kind of money aside every year. So you’re going to need to prioritize filling one up first. And in most cases, the RRSP wins.
Your objective when you invest money in one of these two types of accounts is twofold. First, to save money so you don't have to work until you drop dead. Second, to limit the amount of taxes you pay. For most of us, the way to do that is to reduce our taxable income as much as possible every year. Any dollar you put into an RRSP does just that. And since you’re free to contribute 18% of your earned income, up to a maximum of $30,780, you can reduce your income by a pretty decent chunk. Possibly even enough to bring you down to a lower tax bracket — which means you're not only reducing the amount of money you're taxed on, but the rate at which that money is taxed.
A TFSA’s annual maximum contribution, on the other hand, is only $6,500 and that money does not get subtracted from your income. TFSA contributions are what's called “after tax.” But that doesn't mean it's never the right answer. TFSAs are designed to make funds available throughout a person’s life, offer tax-free growth, and since the CRA won’t assess penalties for withdrawal from TFSAs, are especially great for big purchases like cars, real estate or weddings. Unlike RRSPs, which you’ll need to convert to another account type or annuity by the last day of the year you turn 71, you can keep a TFSA for as long as you live.
So why would anyone even bother with a RRSP? There are a couple big reasons. Since RRSPs are tax-deferred, they offer immediate tax benefits that TFSAs don’t. Any amount you contribute to an RRSP in a given year will be safe from income tax, which can save you a ton of out of pocket money at tax time. (TFSAs instead offer tax-free growth on any investment.) If you happen to have a lot of money available to put away, the RRSP annual contribution ceiling is normally much higher than that of TFSAs. Contributions to both accounts roll over from one year to the next, if you’ve never contributed, lucky you!
Here are some rules of thumb that can help you make the choice.
- If you earn less than $106,717, a TFSA should be funded first, since you are in the second lowest tax bracket.
- If you make over $165,430, your tax rate goes up to 41.32%, so the RRSP will typically benefit you most by bringing down your taxable income.
- If you have a pension through your employer that offers matching funds, prioritize that above all else. Otherwise you're throwing away salary.
- If you think your income after retirement age will be greater than what you earn now, your money should go into your TFSA first. Because it's better to pay the lower income tax rate on that money now, than the higher rate you'll pay when you take it out.
- If you think you might need the money before retirement age, TFSAs are more flexible. Though RRSP's do allow for one time penalty-free withdrawals for first time home buyers.
First thing’s first: a tax-free savings account (TFSA) need not be a savings account. We’re not sure who decided to call it that, but we think of a TFSA as a basket for saving or investing. You can pick what to put in your “basket” from an array of financial instruments— exchange traded funds, guaranteed investment certificates, stocks, bonds and, yes, actual savings. The important part is: Whatever gains you make from the investments in that basket are tax-free.
You might be wondering, “Where’s the catch? This looks too good to be true!” Indeed, there are a number of rules attached to TFSAs. Luckily, we’ve covered the ones you need to know before enjoying sweet TFSA bliss.
TFSA Contribution Rules
The maximum amount of money you can deposit into your TFSA annually currently stands at $6,000. This figure has remained the same since 2016, and is called your TFSA contribution room. Thankfully, the total amount that you contribute is cumulative. This means that you any unused contribution room will carry over from one year to the next. The actual amount you can add to a TFSA will go up each year, regardless of whether or not you deposit money. If the amount of money in your TFSA rises due to the growth of your investments or interest earned on savings, this does not count as part of your annual contribution. There’s only one thing the Canadian government limits — how much money you put in.
Should you not have a TFSA, then you might just be able to contribute a grand total of $81,500 tax-free. That’s provided you were eligible and at least 18 years old in 2009 – the first year the TFSA was available. If you already have a TFSA and have never taken out any money, you can keep adding to your account up until you hit your TFSA limit. And if you’ve withdrawn money from your TFSA in the past, don’t fret, you’ll get that room back, but not until the following year.
At any time over the course of a calendar year, if you contribute more than your allowable TFSA contribution room, you will be officially “over-contributing” to your TFSA, and you will be subject to a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount remains in your account. In short, it’s best to stay within your TFSA contribution room.
TFSA Withdrawal Rules
For the most part, you can withdraw any amount of money you like from your TFSA. The great news is that taking out funds from a TFSA doesn’t reduce the total amount of contributions you have already made for the year. Withdrawals, excluding qualifying transfers and specified distributions, made from your TFSA this year will only be added back to your TFSA contribution room at the beginning of the following year.
Should you decide to re-contribute or replace the money you withdrew, within the same year, you can only re-contribute if you have available TFSA contribution room.
As long as your over 18 years of age and you have a valid SIN number, you’re perfectly eligible to open a TFSA. A person determined to be a non-resident of Canada for income tax purposes can hold a valid SIN and be allowed to open a TFSA. However, any contributions made by a non-resident are subject to a 1% tax for each month the contribution stays in the account.
TFSA Investment Rules
For the most part, whatever is permitted in a Registered Retirement Savings Plan (RRSP), can go into a TFSA. That includes cash, mutual funds, securities listed on a designated stock exchange, guaranteed investment certificates, bonds and certain shares of small business corporations. You can contribute foreign funds but they will be converted to Canadian dollars which cannot exceed your TFSA contribution room.
Depending on the type of investment held in your TFSA, you may incur a loss in your original investment. Any investment losses within a TFSA are not considered a withdrawal and therefore are not part of your TFSA contribution room.
Just because it’s called a TFSA, doesn’t mean there’s absolutely no tax at all. Rules apply and there are some instances where tax does come into the equation. For example, when you hold foreign investments that pay dividends.
The dividends of foreign investments are subject to non-resident withholding tax (NRT). Like any tax, this eats into the amount you actually make. But that doesn’t mean you should rule out foreign dividend paying investments. It’s important to have a diversified portfolio and this can mean having foreign dividend-paying stocks, particularly in a sector that might not be well represented on the Canadian Stock Exchange.
TFSA Stock Trading Rules
You may be surprised to learn that your trading activity could constitute a business, even if it’s done inside a TFSA. The tax rules mean that should a TFSA operate like a business then they have to pay income tax.
Recently, the Canada Revenue Agency (CRA) has focused their audits on taxpayers that are actively trading within their Tax-Free Savings account.
The CRA takes account a number of things into account when determining whether or not a TFSA is subject to income tax. These include the duration of the holdings, the frequency of the transaction and your intention to hold investments for resale at a profit.
In situations where one or more TFSA taxes are applicable, a TFSA return must be filled out and sent by June 30 of the year following the calendar year in which the tax arose.
TFSA Rules On Death
Wondering what happens to you or a loved one’s TFSA when you pass away? The types of beneficiaries for TFSA purposes are:
Determining the type of beneficiary can be affected by:
For single or widowed individuals, anyone can be named as a beneficiary. The value of the plan at the time of death would go tax-free to that beneficiary. If the beneficiary takes the money in cash, that’s the end of the story. If he or she wants to put it in a TFSA or RRSP, there must be contribution room to accommodate the money. Married or common-law individuals can choose anyone they want as a beneficiary or successor holder.
Registered Retirement Savings Plans (RRSPs) are a great way to save for retirement. However, there are tax consequences if you withdraw the funds before retirement. Here’s what you need to know.
Things to know before withdrawing your RRSP
When you withdraw money from your RRSP, you must declare the full amount as income in the year you withdraw, and that can result in a hefty tax bill.
Think carefully before withdrawing money from your RRSP to cover debts. You lose the power of compounding. Long-term contributions earn money on both the contribution and any investment earnings. It takes a long time to replace the funds. You must include the full amount of the RRSP withdrawal amount in your income at tax time. While some tax is withheld at the time of the withdrawal, (see What is RRSP Withholding Tax) it may not be enough to cover the full amount of income tax that will be owing. Try to withdraw the funds from a Tax-Free Savings Account or consult a financial professional and re-jig your budget to put more towards debt repayment.
You don’t get contribution room back. The Canada Revenue Agency (CRA) only lets you count that contribution once — you can’t add back the amount of a withdrawal to existing contribution room.
You can request a “gross” or “net” withdrawal. A $1,500 gross withdrawal will deduct $1,500 from the RRSP, and the amount you receive will have taxes and administrative fees deducted. If you choose “net” withdrawal, you will receive a cheque for $1,500, but the actual withdrawal amount will be higher to cover withholding tax and any administrative fees.
Remember: You can name a beneficiary on an RRSP, and it can be “revocable” (you can change it any time) or “irrevocable” (you cannot change it without the named beneficiary’s permission.) If you named someone an irrevocable beneficiary, you cannot withdraw the funds without that beneficiary’s permission. If the beneficiary is unable to provide consent (e.g. a child who is younger than the provincial age of majority or a person with cognitive or mental impairments) you will not be able to withdraw the funds or change the designation.
Taxes on RRSP Withdrawals
There are two types of tax you will need to consider if you make an RRSP withdrawal, withholding tax and your marginal tax rate.
What is RRSP withholding tax?
RRSP withholding tax is a tax that’s withheld when you make a withdrawal from your RRSP. The money witheld by your financial institution is passed to the CRA. The rate of RRSP tax varies depending on the amount you withdraw and the providence you live in. This tax is also called RRSP Withdrawal tax.
What is Marginal Tax Rate
Your marginal tax rate is the combined federal and provincial taxes you pay on income at tax time. Your financial institution will provide a T4-RRSP showing the amount of the withdrawal, and any tax withheld. You must declare this amount on your T1 General Income Tax Return in the calendar year you withdrew it.
Remember: RRSP withdrawal amounts are added to your gross earned income. Depending on the size of the withdrawal, it could push you into a higher tax bracket.
Federal Tax Rates
The tax rates for the current year can be found on the Canada Revenue Agency: website.
Provincial Tax Rates
In addition to federal tax, provincial tax must also be taken into account. Provincial tax much rates for the current year can be found on the Canada Revenue Agency: website.
Remember: Your marginal tax rate is the total of both federal and provincial income taxes on income.
Withdrawing RRSP At Retirement
You are permitted to contribute to an RRSP until December 31 of the calendar year you turn 71. You may contribute to a spousal RRSP until December 31 of the calendar year your spouse turns 71.
At the end of the calendar year you/your spouse turn 71, the RRSP must be collapsed. At this point, you can:
Take the full amount as a lump sum withdrawal, subject to withholding tax. The full amount must be added to your income and would be subject to your combined marginal tax rate. That could result in a very large tax bill.
Convert the RRSP to a Registered Retirement Income Fund (RRIF) and start drawing payments from it. CRA sets a minimum amount that must be withdrawn. It is based on age and is a percentage of the market value of the RRIF.
The RRSP withdrawal age is 71 years. You are not allowed to own an RRSP past December 31 of the calendar year you turn the age of 71. The funds must be withdrawn, or the account converted to an RRIF.
RRSP Withdrawal Rules
We mentioned this rule before, but it’s an important one, that’s worth repeating. Withdrawal from an RRSP must be included as income and is subject to income tax at your combined marginal tax rate. Funds withdrawn under the Homebuyers’ Plan or the Lifelong Learning Plan are not considered income, do not have withholding tax deducted but must be paid back over a set period of time.
Homebuyers’ Plan (HBP)
If you meet the eligibility criteria, CRA allows you to withdraw up to $25,000 tax-free to put towards the purchase of a new home. You have 15 years to pay the funds back and repayments start the second year after you withdraw the funds. CRA will send you a statement each year with your HBP balance owing, payments made to date, and what the minimum payment amount is.
Lifelong Learning Plan (LLP)
If you meet the eligibility criteria, CRA allows you to withdraw up to $10,000 tax-free per calendar year, subject to a maximum combined total of $20,000 tax-free to finance full-time education or training for you or your spouse. You cannot withdraw funds to pay for your children’s education under this plan.
You can spread the eligible withdrawals over 4 years. The accumulated total cannot exceed $20,000. You have 10 years to pay back the LLP loan, starting in the fifth year after your first LLP withdrawal. CRA will send you an LLP notice each year with your LLP balance, payments made, and the amount of your next LLP payment. You must file income tax each year and designate your LLP repayment on Schedule 7. The CRA go into more detail on LLP here.
Spousal RRSP Withdrawal Rules
Spousal RRSPs have some specific rules about withdrawals. Fred and Ginger have a spousal RRSP. Fred (the contributor) makes the contributions and receives the tax deduction; Ginger (the annuitant) owns the account and will receive the income from it at retirement. Ginger will be taxed on the income.
Attribution rule: The spousal attribution rule is designed to prevent the use of a spousal contribution for tax avoidance. If funds are withdrawn within 3 years of the contribution being made, the contributor, rather than the annuitant will be taxed.
If Fred contributes to Ginger’s RRSP, and then Ginger withdraws the money within a year later, Fred will have to pay tax on the withdrawal amount.
Spousal RRIF: A spousal RRSP converts to a spousal RRIF at age 71. If Ginger withdraws only the minimum required RRIF amount, Ginger will pay the tax. However, if Ginger withdraws more than the minimum amount, Fred will be taxed on the excess amount.
RRSP Withdrawals at age 55+
You can convert your RRSP to an RRIF starting at age 55 and begin receiving payments. Once you convert the RRSP to an RRIF, you cannot change your mind later and turn it back into an RRSP. The biggest danger with early conversion to RRIF is you could run out of funds before you die. Always talk to a financial professional to ensure you understand all your options.
RRSP Withholding Tax On Multiple Withdrawals
If you withdraw multiple smaller amounts in a short period of time to avoid the higher withholding tax, your financial institution could still deduct the amount of withholding tax that would apply on the total amount. For example, if you want to withdraw $8000 but you split it into 4 monthly withdrawals of $2000 to avoid the 20% tax withholding, your financial institution could still withhold 20% on the last withdrawal if they notice the pattern.
Locked-in RRSP withdrawal
If you transfer pension funds to an RRSP, the funds may need to be “locked-in” until retirement. The funds follow pension locking-in rules and it varies by province. You cannot withdraw funds from a locked-in RRSP until the specified retirement age.
You can unlock funds in special circumstances such as financial hardship (not all provinces allow this), shortened life expectancy or you can request small balances to be unlocked at age 55.
When you’re building your portfolio, you’ll have a lot of choices about where to put your money. Equities (a.k.a. stocks), bonds, cash, commodities (things like silver or crude oil), foreign and domestic markets, small and large companies—all of those investments behave differently. For instance, equities tend to have a higher risk but also a higher reward. Historically, they’ve earned a relatively high return on investments over time, but they’ve also had moments of steep decline. Bonds, on the other hand, have tended to increase in value more slowly over time but have also suffered fewer big losses. When building a portfolio, investors should consider how much risk they want to take on and then spread their money around according to that risk tolerance. That’s asset allocation.
The precise nature of that allocation is a matter of opinion. The Internet is filled with endless advice, but in reality, there is no right answer: Every investor has a different risk tolerance and a different timetable for investing (the longer you have to invest before you need the money, the riskier advisors believe your asset allocation should be).
What are the pros? Putting all of your money into the Russian stock market is probably foolish. There’s a chance it will outperform all other investments, but there’s a probably greater risk that it won’t (and a significant risk that it’ll tank). Is that a chance you want to take with, say, your retirement funds? In a nutshell, that’s the advantage of spreading your investments around: You make sure you’re invested in enough sectors to be able to take advantage of positive trends without being wiped out by negative ones.
But in order to really take advantage of the principle, you have to monitor and adjust your allocations. When you’re younger, you want a higher proportion of assets in riskier investments; as you age, you want to move money into more stable places. If you lose your shirt in equities in your 30s, you have plenty of time to make up for losses; if that happens in your 80s, well…you get the idea.
An exchange-traded fund — ETF for short — is an investment fund that lets you buy a large basket of individual stocks or bonds in one purchase. You could say that the ETF is a relative of a mutual fund. But index based ETFs have one big advantage over their actively managed cousins: lower fees. It’s not unusual for a mutual fund to charge a 1% annual fee; ETFs usually charge less than half that — between 0.05% and 0.25% is the normal range.
Do you want to invest your money but also avoid some of the risks that come with picking individual stocks? Mutual funds provide the benefits of a diversified portfolio without the time needed to manage one.
Mutual funds are one of the most common tools investors use to build long-term retirement savings. If you have any type of retirement account — there’s a good chance your portfolio includes mutual funds.
What is a mutual fund?
A mutual fund pools money from a set of different investors in order to invest in a managed portfolio of stocks and/or bonds. Unlike the stock market, in which investors purchase shares from one another, mutual fund shares are purchased directly from the fund or a broker who purchases shares for investors.
The price of the mutual fund, also known as its net asset value (NAV), is determined by the total value of the securities in the portfolio, divided by the number of the fund’s outstanding shares. This price fluctuates based on the value of the securities held by the portfolio at the end of each business day. One thing to note – mutual fund investors don’t actually own the securities in which the fund invests; they only own shares in the fund itself.
In the case of actively managed mutual funds, the decisions to buy and sell securities are made by one or more portfolio managers, supported by researchers. A portfolio manager’s primary goal is to seek out investment opportunities that help enable the fund to outperform its benchmark, which is generally an index such as the S&P 500. One way to tell how well a fund manager is performing is to look at the returns of the fund relative to this benchmark. While it may be tempting to focus on short-term performance when evaluating a fund, most experts will say that it’s best to look at longer-term performance, such as 3- and 5-year returns.
Benefits of a mutual fund
There are two primary benefits to investing in mutual funds:
Diversification: You could say that diversification is one of the most important principles of investing. If a single company fails, and all your money was invested in that one company, then you have lost your money. However, if a single company fails within your portfolio of many companies, then your loss is limited. Mutual funds provide access to a diversified portfolio, without the difficulties of having to purchase and monitor dozens of assets yourself.
Simplicity: Once you find a mutual fund with a good record, you have a relatively small role to play. The professional fund managers can do all the heavy lifting.
Disadvantages of mutual funds
The main disadvantage to mutual funds is that, because the fund is managed, you’ll incur fees no matter how the fund performs. Investors have to pay sales charges, annual fees, and other expenses with no guarantee of results.
Also, some people don’t like the lack of control with a mutual fund; you may not know the exact makeup of the fund’s portfolio and have no control over its purchases.
The difference between these two rate types is in their names: one doesn't change through the mortgage term, while the other can. There are two common ways mortgages are structured — and for your purposes, “structured” simply refers to how much you have to pay a month, and over how many months. There are fixed rate mortgages and variable rate mortgages (which you’ll often hear referred to by their aliases — adjustable rate mortgages or just VRMs.)
A fixed rate mortgage is pretty straightforward. A bank quotes you an annual percentage rate and term — say 4% for 5 years on a $300,000 loan, amortized over the course of 25 years — and you agree to pay a specific amount every month so that at the end of the term you will have paid off the principal sum you borrowed, the interest you owe to the bank, as well as any associated expenses which will have been added all together then divided into equal monthly payments. Fixed rate mortgages move in lockstep with the government of Canada’s bond yields, or the interest rate the government pays to borrow money through bond sales.
Variable rate mortgages are a bit trickier. Like fixed rate mortgages, they too have a fixed term, but their interest rates change regularly — as often as every month, based on any movement of the prime or overnight rate, the government-set rate that serves as the primary catalyst for interest rates moving up or down. Though many studies have shown that those who accept the inherent risk of a floating interest rate of VRMs have saved money in the long term, it’s by no means guaranteed, and this rationale for choosing a VRM is now much debated. VRMs can be designed two ways, either with fixed payments or fluctuating payments. If you choose to pay the same amount every month for the term of the mortgage, how much of your payment goes towards the principal and how much goes towards interest will depend on whatever the interest rate happens to be that month. If you choose a VRM with a fluctuating payment, your monthly mortgage payment could vary wildly from month to month.
Those who have any psychological need for financial consistency will find themselves more comfortable with a fixed rate mortgage; those who feel comfortable with a little more uncertainty might find VRMs more appealing.
If you have people who depend on you financially, you need a safety net in case something goes wrong. This is where term life insurance comes in.
With term life insurance, you name a beneficiary or beneficiaries – usually your spouse and/or children – and they receive a tax-free death benefit if you pass away. The amount of the benefit should be enough to help them remain in their home, cover their living expenses and remain on track for financial security during a very difficult time.
If there is anyone who counts on you financially, then you should consider term life insurance. Here are some clear signs:
You have kids. Life insurance can ensure that they’re able to sustain themselves and still pursue goals such as post-secondary education.
You’re married. Life insurance can prevent debts, mortgages, rent or other bills from adding financial strain during an emotionally difficult time. It can also help your spouse remain on track for retirement.
You're a partner in a company. Often life insurance is used to fund a buy/sell agreement so remaining business partners are able to buy-out the beneficiaries of your shares in an organization.
You support causes. Life insurance is a great way to leave a tax-free benefit to a school, church, charity or other causes that matters to you.
There are many more examples of where term insurance can be a useful aspect in your financial plan, but these are the most common and straightforward use cases.
Sometimes in life, everything is going great and then you get sick. That part is bad enough. But what if your illness requires expensive treatments or time away from work? Critical illness insurance is an inexpensive way to protect yourself.
Critical illness insurance pays you a tax-free lump sum if you are diagnosed with some of the most common serious illnesses, such as cancer, heart attack and stroke. You can use the money to make your recovery easier and your life better, such as paying for drugs, treatment south of the border, making your home more accessible or covering time off work for you or someone who cares for you. The last thing we want to happen when you fall ill, is that you have to dip into your retirement savings or emergency fund that you have worked so hard to build up.
There are quite a few things that you’ll want to consider about critical illness insurance such as what conditions are covered. Not every policy is the same. For example, some policies only cover three illnesses while others cover more than 20. You might also want to Google about the surprising number of expenses that are not covered by public healthcare plans. The financial risk is real. As with all types of insurance, you want to apply while you are still as young and as healthy as possible.
If you depend on your paycheque to pay the bills, you need something to fall back on if something unexpected happens. That’s why disability insurance is a basic building block of a good financial plan.
Disability insurance is designed for when you are not able to earn an income due to illness or injury. You can receive up to 65% of your pre-tax salary each month right up until age 65 in most cases. In other words, it’ll be like your pay cheque never stopped.
We recommend disability insurance to make sure that when you are unable to earn an income, you can still pay your mortgage or rent, still put food on the table, without touching any of your savings.
If you’re currently working and earning an income then disability insurance should be on your radar. Consider the following situations:
Did you know that roughly 1 in 3 people will become disable for at least 90 days during their working tenure? For many people, having disability insurance in place is even more important for their financial security than saving and investing, because you just never know when something could go wrong. The sooner you apply, the easier and less expensive your coverage is likely to be.
In the 2022 Budget, the Government of Canada proposed the introduction of the Tax-Free First Home Savings Account (FHSA), a new registered plan to help Canadians save towards their first home by allowing account holders to contribute up to $40,000 over the lifetime of the plan.
What is a First Home Savings Account (FHSA)?
An FHSA combines the features of a Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) . Like an RRSP, contributions would be tax-deductible and qualifying withdrawals to purchase a first home would be non-taxable1, like a TFSA. However, with an FHSA and unlike the Home Buyers’ Plan, the funds do not need to be paid back.
To be eligible to open an FHSA you must be:
- A Canadian resident
- 18 years or older and
- A first-time home buyer
The account can stay open for 15 years or until the end of the year you turn 71, or at the end of the year following the year in which you make a qualifying withdrawal from an FHSA for the first home purchase, whichever comes first.
Contributions and Deductions:
Individuals would be able to claim an income tax deduction for contributions made in a particular taxation year Annual contributions are capped at $8,000, up to a $40,000 during the lifetime contribution limit. Unused contribution room can carry forward to the following year up to a maximum of $8,000.
What if you don't purchase a home?
Any savings not used to purchase a qualifying home5 could be transferred to an RRSP or RRIF (Registered Retirement Income Fund) on a non-taxable transfer basis, subject to applicable rules6. The funds transferred to an RRSP or RRIF will be taxed upon ultimate withdrawal. If not transferred but instead withdrawn, FHSA funds would be subject to taxes.
What is a qualifying withdrawal?
Must be a first-time homebuyer and a resident of Canada at the time of the withdrawal to the acquisition of the qualifying home5, You must have a written agreement to buy or build a qualifying home5 located in Canada before October 1 of the year following the year of withdrawal, and You must also intend to occupy the qualifying home as your principal place of residence within one year of buying or building it.
How is the FHSA different from the Home Buyers Plan?
With the current Home Buyers' Plan, Canadians can withdraw up to $35,000 from their RRSP subject to eligibility and conditions, then pay back the funds to their RRSP over 15 years. Unlike the Home Buyers’ Plan, with an FHSA the funds do not need to be paid back. Our advisors are here to guide you on which investment option, or combination of options, will help you reach your home ownership goals.