Following the publication of my last column on the subject, new measures have emerged regarding the Tax-Free First Home Purchase Savings Account (TFSAP). Here’s an update on this new investment vehicle that we’re eagerly awaiting and will no doubt be one of the themes of the year.

Having received royal assent on December 15, 2022, the CELIAPP is now included in the Income Tax Act (EStG) and should, if all goes well, be on the shelves of financial institutions by April 1st. Yes, yes, if all goes well, because some management and interpretation problems still remain unresolved, making the creation of the product difficult. The next federal budget can provide information about this.

We now know that contrary to what was announced last August, the CELIAPP and Home Buyers’ Plan (RAP) programs will go hand in hand. It will therefore be possible to withdraw funds from both the TFSA and an RRSP account through the HBP to acquire eligible residency.

One of the main differences between these two programs is that amounts deducted from an RRSP through the RAP program must be repaid, but not those deducted from a TFSA. From a different perspective, the RAP offers relief and more flexibility in the event of separation or for a disabled person.

Despite the late availability of access to this new account, it will be possible to deposit up to $8,000 in 2024.

The tax deduction related to the contribution to the CELIAPP is possible for the current year. Contributions made in the first 60 days of a year are thus deductible for the current year and not for the previous year as with an RRSP.

To open an account, you must first determine your eligibility. You must be a specified individual, meaning you must be a Canadian resident between the ages of 18 and 71 and within the previous four years of opening the account. Thus, the owner of a rented condominium could qualify for the opening of a CELIAPP. However, if your spouse is the owner or was within the years in question, you may not qualify to open a TFSA.

It will be possible to transfer funds from an RRSP to a TFSA. Since the tax deduction was requested on the contribution to the RRSP, this option does not allow a deduction of the contribution to the TFSA. It will also be possible to do the opposite, i.e. switch from the TFSA to an RRSP or an RRIF without any tax consequences.

You can help your loved ones financially to contribute to a TFSA by giving them money. But beware, if it is a loan, the attribution rules may well apply when withdrawing the amounts. Legislation is not clear on this issue, so be careful.

Once funds are deposited into the TFSA, they can be invested in the same types of investment products as those eligible for an RRSP. As with an RRSP, the income is not taxable even if the amounts to purchase the eligible property are deducted from the TFSAPP.

Some questions remain unanswered. For example, we know that the amounts in an RRSP are family wealth, but not those in a TFSA. What happens to the funds transferred from the RRSP to the TFSAPP? Let the legal community take care of the matter.

For American citizens living in Canada (there are more than meets the eye), the TFSA, like the TFSA, is not recommended as they are not recognized in the eyes of the American tax authorities as vehicles whose income accrues tax-exempt other than an RRSP, which therefore is more beneficial.

As this plan has a term of 15 years, the property must be acquired within this period, otherwise the plan must be closed. From this point on, a tax-free withdrawal of amounts accumulated in the plan is no longer possible. Tax-free withdrawals from a TFSAPP are limited to the purchase of a single lifetime property.

Finally, for those who love history, this new plan is similar to the Registered Home Savings Plan (REEL) introduced by the federal government of Pierre Elliott Trudeau in 1974. Our Federal Finance Minister Chrystia Freeland may be inspired by this…