Helping young Canadians afford a down payment faster with the new Tax-Free First Home Savings Account

The Tax-free First Home Savings Account will allow prospective first-time home buyers to contribute up to $40,000 ($8,000 per year for 5 years) tax-free per person toward their first home.

Here is an example:
Matthew and Taryn are aspiring homeowners living together. Starting in 2023, they each save $8,000 per year (the annual maximum) in their Tax-Free First Home Savings Account and are able to deduct this from their income. They both make between $50,000 and $100,000, and the Tax-Free First Home Savings Account allows them each to receive an annual federal tax refund of $1,640.
Matthew and Taryn have a combined $90,000 (including tax-free investment income) in their Tax-Free First Home Savings Account at the end of 2027, when they finally find their ideal first home.
By using the Tax-Free First Home Savings Account, Matthew and Taryn are finally able to afford a down payment to buy their first home. They can withdraw their down payment tax-free, saving thousands of dollars that can be put towards their new home. In addition, they will claim the doubled First-Time Home Buyers’ Tax Credit, providing an additional $1,500 in tax relief.

Legislation to approve the Tax Free First Home Savings is expected to be passed in 2023.