When considering home ownership in Canada, the terms "Home Buyers Plan" and "First Home Savings Account" often pop up. The Home Buyer's Plan (HBP) and the First Home Savings Account (FHSA) are programs designed to help individuals purchase their first home in Canada. To take advantage of the HBP and/or FHSA, you need to be considered a first-time home buyer by CRA. But what if you're a joint tenant? Can you benefit from these programs? Let’s break it down.
What Are the Home Buyers Plan and First Home Savings Account?
The Home Buyers Plan (HBP) is a fantastic initiative by the Canadian government that allows first-time home buyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) without penalties. You can withdraw up to $35,000 to help purchase your new home.
On the other hand, the First Home Savings Account (FHSA) is a newer program aimed at helping Canadians save for their first home. It combines the features of an RRSP and a Tax-Free Savings Account (TFSA). Contributions to the FHSA can grow tax-free, and withdrawals for your first home are also tax-free.
Who’s Considered a Joint Tenant?
A joint tenant is someone who co-owns a property with one or more others. All tenants share equal rights to the property. This means that if you and a friend, sibling, or partner buy a home together, you're likely joint tenants.
Can Joint Tenants Use the Home Buyers Plan?
The short answer is yes! Joint tenants can participate in the Home Buyers Plan. The HBP allows you to withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home for yourself or a related person with a disability.
Eligibility for Joint Tenants:
- Both joint tenants can use the HBP if they are first-time home buyers.
- Each person can withdraw up to $35,000 from their RRSPs, for a combined total of up to $70,000.
- A first-time home buyer is defined as someone who has not owned a home in the four years before the withdrawal and meets other specific criteria.
Can Joint Tenants Use The First Home Savings Account?
Good news! Joint tenants can also benefit from the First Home Savings Account.
Eligibility for Joint Tenants:
- Both joint tenants can have their own individual FHSAs.
- Each individual can contribute up to $8,000 per year, with a lifetime contribution limit of $40,000.
- The funds can be used together to purchase a home, but each account must be used by the account holder for their portion of the home purchase.
Key Considerations for Both Programs:
Eligibility: To qualify for both the HBP and FHSA, you must be a first-time home buyer. This means you haven’t owned a home in the last four years.
Account Management: Each person needs to manage their own HBP and FHSA accounts. You can’t pool resources or combine funds from separate accounts for a single withdrawal.
Home Purchase Timeline: For the HBP, funds must be used to buy or build a home within a specific time frame, usually within one year of withdrawal.
Qualifying Home: The property must be located in Canada and intended to be your principal place of residence within one year of purchase.
Conclusion:
In summary, joint tenants in Canada can utilize both the HBP and the FHSA, provided they meet the respective eligibility criteria. Each tenant can maximize their benefits by leveraging both programs simultaneously. Being a joint tenant opens up financial avenues when purchasing your first home. With the ability to leverage both the Home Buyers Plan and First Home Savings Account, you can gear up for a smoother path toward home ownership.
Joint tenants have a golden opportunity to maximize their benefits through Canada's home-buying programs. Whether you’re looking to withdraw from your RRSP or save tax-free with an FHSA, it’s all possible! So, gather your savings, partner up, and pave the way to your dream home. Your future self will definitely thank you!
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