Courtier Immobilier Montréal Yanick E Sarrazin

The TFSAPP or the tax-free savings account for the purchase of a first property

the tax-free savings account for the purchase of a first property

Buying a home is an important investment that can lead to one of your best investments for life. There are many potential buyers, but there are also many who are having trouble getting the down payment they need for such a large real estate purchase, especially with rising property prices.

Since the last election campaign, the Liberal government, under the leadership of Justin Trudeau, had mentioned the possibility of introducing an RDSP. This registered program would be dedicated to first-time buyers under the age of 40 to help them access their first home. However, the idea of the RDSP was abandoned and replaced by the TFSAPP or tax-free savings account for first-time home buyers. The TFSAPP would be in place as of January 2023 and has certain features. 

The TFSAPP : what does it consist of?

The tax-free savings account for the purchase of a first property (TFSAPP) is designed to help first-time buyers save for their down payment. The main idea is to help young people become homeowners through the housing frenzy. The TFSAPP combines a variety of TFSA (tax-free savings account) and RRSP (registered retirement savings plan) benefits. 

In this form of savings, an individual can contribute up to a maximum of $8,000 per year, for a maximum accumulation of $40,000. These contributions are tax-free and the accumulated income is tax-free, so there is nothing to pay back over the years. Withdrawals from the purchase of a property are then also non-taxable.

Its eligibility criteria

In order to access and benefit from the TFSAPP, certain eligibility criteria must be met:

-You must be a Canadian citizen and resident 18 years of age or older.

-There is no maximum age limit for opening an account.

-You must not have acquired a property when opening an account or four years before opening it. It must therefore be a first real estate purchase.

Its characteristics

The TFSAPP also has certain features:

-The maximum contribution per year is $8,000.

-Unused contributions cannot be transferred to the following year.

-The maximum TFSAPP limit is $40,000.

-Like an RRSP, contributions are fully tax deductible. This increases the ability to save. 

-Withdrawals related to the purchase of a property are non-taxable. 

-These non-taxable withdrawals will be used to purchase a single property for life.

-If a withdrawal is made and has a purpose other than the purchase of real estate, the amount of the withdrawal will then be taxable. 

-It is not possible to withdraw from the TFSAPP and HBP (home buyers’ plan) for the same property.

-The money can be invested in a TFSAPP for up to 15 years or until the age of 71. If this maximum period is reached, the account must be closed and the total amount of the accumulated money transferred to an RRSP

The TFSAPP then presents certain constraints, but also significant advantages for a first-time buyer. 

The TFSAPP: questions remain

In 1974, Pierre Elliott Trudeau, the former Prime Minister of Canada and father of Justin Trudeau, introduced a similar program to help young people become homeowners. The REEL, or home savings program, was abolished after 10 years.

In Canada, there is currently a similar program, the HBP or home ownership program. The HBP allows you to acquire or build real estate by making withdrawals from your RRSPs. The limit is $35,000.

The arrival of this new savings program, the TFSAPP, is very recent. The announcement was made in the last federal budget in April 2022. Many questions arise and additional rules regarding this savings account are still unknown. With its implementation scheduled for January 2023, the subtleties of this form of savings will be better known and we will have a clearer picture of this new savings program for first-time home buyers.

Scheduled for 2023, the tax-free savings account for the purchase of a first property (TFSAPP) is designed to help first-time buyers through the housing frenzy to save for their down payment. The TFSAPP has many advantages, such as improved ability to save, with fully tax-deductible contributions and non-taxable withdrawals on the purchase of your first home. In addition, the maximum TFSAPP limit is raised to $40,000, for a maximum annual contribution of $8,000. The TFSAPP has many advantages, but also many questions about its application. More information will be revealed over the next year in order to gain a better understanding of the TFSAPP.

Consult other real estate news

Questions ? Contact one of our real estate brokers