The New First Home Savings Account & Tax Reminders
There is a new financial account coming to Canada on April 1st 2023, and I wanted to make sure you're aware of it. This account is called the First Home Savings Account. It will be the most effective way for someone to save for a down payment on a property. This might not apply to you, but chances are you know someone that is in the position of purchasing their first home in Canada. If this is the case, please make sure they know about this opportunity!
Some of the highlights of this account are as follows:
1. Tax deductible contributions: Any contributions you make to this account will act as a tax deduction for you - just like an RRSP contribution. When you end up filing your tax return, you'll receive a refund.
2. Tax-free growth + Tax-free withdrawals: Once the funds are added to the account, you can invest these funds in a variety of ways. Any growth you receive in the account you won't pay tax on, and when you pull out the funds via a qualifying withdrawal (As a first time home buyer) the funds come out of the plan completely tax free!
3. Utilize with the Home Buyer's Plan: This new plan can be used in conjunction with the Home Buyer's Plan. What this means is that as an individual if you are purchasing a home and maximize both the First Home Savings account and the Home Buyer's Plan, you could effectively have $75k+ as a tax advantaged down payment. If you are purchasing with a spouse or common law partner, this amounts to over $150k+ that you could have as a down payment.
There are other details which I touch on in more detail in the video below, and these include how you can participate in the plan even if you own rental properties, along with reasons to open the account this year, regardless if you plan to contribute.
A couple other reminders as we approach tax filing deadlines. For individuals, your tax return and any payment is due on May 1st, 2023. For sole proprietors, your payment is due on May 1st, 2023, but you have until June 15th 2023 to file your return. I personally never do not understand this... you can file a month and a half later after payment is due, but how do you know how much you have to pay without filing??
- Ontario Staycation Tax Credit: This is a unique one for 2022, as the government created this tax credit to help reignite the tourism sector in Ontario. This tax credit could save you $200 off your tax return as an individual, or $400 as a family. In order to claim this credit, you must have stayed somewhere in Ontario for leisure purposes (campground, lodge, hotel, motel, etc.) and can claim expenses up to $1,000 as an individual, or $2,000 as a couple/family. You need to have detailed receipts of these expenses, including the location of accommodation, amount of HST, date of the stay, and the name of the payor.
All tax tax slips for your investments have either been mailed out to you already or you can access them online on your portfolio viewer. If you need help locating these tax documents, or have questions about your circumstance, please let me know!
Financial Advisor | CFP, B.Eng