To tackle the bane of unaffordable housing prices, the federal government has introduced a novel program, which is a RRSP + TFSA combined. In this program, first time home buyers will be able to allocate up to $40K of income to this program, get a tax deduction on the $40K life RRSP (Maximum yearly contribution of $8K) and upon withdrawal of funds for house purchase, like TFSA the funds will not be taxed. The best parts of both TFSA and RRSP are included in this rather creative program, as a savings mechanism to help young Canadians buy a house. One key point to note about this program is that it is not the RRSP home buyer’s plan. Both plans cannot be used simultaneously. Additionally, unlike in a RRSP home buyers plan where funds are borrowed from RRSP, these funds will not have to be paid back to the RRSP program.
In our May letter, in an article about the new First Home Savings Account (FHSA), we wrote:
One key point to note about this program is that it is not the RRSP home buyer’s plan. Both plans cannot be used simultaneously.
Correction: this was true when the FHSA was first announced. However, under the legislation as it was actually enacted and is now in force, the FHSA and the Home Buyer’s Plan can be used together in respect of the same qualifying home purchase.