September 2022 Poll

In your view is the maximum Tax-Free First Home Savings Account (maximum $40,000) a better home savings plan than the RRSP Home Buyer’s Plan (maximum $35,000)?

Comments


Not everyone today can contribute equally to a TSFA & RRSP to reach the maximum First Home savings   incentive. I am concerned that the tax payer will look only at the $5000 difference in TSFA vs RRSP and select TSFA. Thus possibly missing out on yearly federal tax deductions by opting out of yearly RRSP contributions (affording one or the other) My suggestion is to seek the advise from a tax advisor, who will work numbers, and hit the calculator to see what RRSP contribution potential is available to reach the fullest refund. This refund can be a deposit into a TFSA, with additional budgeting you can maker smaller TFSA contributions to be in a position to select option A TFSA First Home incentive of $40K or (B)  RRSP $35 k Home Buyers, and not missing out on tax & retirement savings.  It is a conversation to have with clients:  to educate them with options available, what fits into their budget, and how they can accomplish both.

By Ann Laurin on September 21, 2022


The answer, as always, is “it depends”.  There are a variety of factors to consider including where the client is at with respect to life stages.  In most cases, either one requires some planning ahead, unless the individual has an influx of money they could put into an RRSP for 90 days to take advantage of the HBP.

Some people like the HBP as a way to shift taxes around.  If you don’t repay the HBP, you pay the taxes over 15 years and reduce the possibility of bigger tax bills in retirement or to the estate.  In that sense, the HBP is perhaps a bit less restrictive than the FHSA.

As the FHSA is new, nobody has any money there yet, so it won’t be effective as a tool for some time.  If one doesn’t purchase a home, then additional hoops are created to jump through.

Either way, the primary piece is that if folks want to purchase a home, they should be saving.  Actually, the argument can be made that they should be saving regardless of whether they want to purchase a home or not. 

By Derek T on September 19, 2022


May I say that Octavia’s comment or request to be hired or whatever it is, has me mystified. And we still don’t have her opinion on the TFSA home buying plan.

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By Octavia on September 12, 2022


From what I have read, the FHSA seems better. It has the benefits of an RRSP in that contributions are tax deductible and income grows tax free inside the plan (when proceeds used to buy a home). It has the added advantage of removing the total accumulated proceeds tax-free - again when buying a home. It allows taxpayers to segregate funds dedicated to a home purchase, keeping any retirement funds (ie RRSP) separate, as well. It’s too new, I suppose to be sure. Time will tell . . .
The only caveat would be to make sure funds are withdrawn to buy a home. Otherwise if there is a large accumulation of funds at withdrawal, a significant tax bill might be incurred. So contributors need to be sure of their home buying intentions and ability to actually afford to buy a home. This may be too intimidating for some taxpayers. 
And, I am old enough to remember the RHOSP and have wondered for many years recently why it was not re-introduced. From what I remember, this is close.

By Michael on September 09, 2022


The FHSA is a “no brainer” for so many reasons.

By Terry on September 08, 2022


I prefer the FHSA. The FHSA reminds me of the simple RHOSP plan that was available 1974-1985, introduced by a previous Trudeau government. I feel it is better for budgeting and planning to keep savings dedicated to home ownership separate from savings targeted for retirement, just like it had been with the RHOSP. The new FHSA forces the saver to think ahead, like the RHOSP, the way savings should be arranged—before the home purchase. The RRSP-HBP is effectively an additional debt to be repaid over 15 years on top of making mortgage payments—after the home purchase. Because HBP payments are optional, the HBP erodes the discipline of treating RRSP savings like a pension that needs to remain untouched until senior years.

By Terry McBride on September 08, 2022


Prefer the RRSP.

By Randolph Edmead on September 07, 2022


Unlike the HB, it’s non repayable over 15 years.

By Timi Adetona on September 07, 2022