First Home Savings Accounts (FHSA) became available to eligible Canadians on April 1st, and according to RBC, the latest data results are “phenomenal.”
“We’re seeing amazing interest in this new tax-free account, particularly among younger Canadians who are building a down payment for their first home,” said Flora Do, vice president of Investments Transformation and Client Segments, Personal Banking and Investments, RBC. “Since our April launch, tens of thousands of RBC FHSAs have been opened by Canadians – phenomenal early uptake of this innovative way to save and invest for a first home.”
The maximum yearly contribution for FHSAs is $8,000. According to RBC’s data, 26 per cent of the tens of thousands of applicants to their institution have already reached that amount. The contribution room accumulates after a FHSA is opened, and the contribution room carries over to the following calendar year.
In addition to the number of applicants maxing out on their contributions, the same percentage (26 per cent) also adds to their savings by incorporating pre-authorized contributions (PACs).
“It’s wonderful to see Canadians seizing the opportunity to open and contribute to FHSAs right away so they can bring their dream of home ownership closer to reality and also take advantage of the tax deduction before the end of the 2023 calendar year,” said Do.
Younger Canadians lead the way in FHSA applications
Millennials are driving the FHSA numbers. Fifty-six per cent of FHSA accounts are held by clients between the ages of 25 and 34. Twenty per cent fall between the ages of 35 and 44. The youngest group, aged 18 to 24, accounts for 18 per cent. Finally, those 45 and up represent six per cent of the group.
It’s worth noting that Canadians don’t necessarily need to pursue homeownership with their FHSA. They can use those funds for their eventual retirement by transferring their FHSA funds tax-free into their RRSP (Registered Retirement Savings Plan) or RRIF (Registered Retirement Income Fund) without impacting their contribution limits to those accounts.
If they’ve previously owned a home, that’s not a problem. The parameters on the application require that neither the account holder nor their spouse/common-law partner has owned a home in which they lived in the current calendar year the account was opened or in the four previous calendar years.
A FHSA must be used to buy a home by Dec. 31 of the 15th anniversary of the account opening or by Dec. 31 of the year the owner turns 71.
