Here’s everything you need to know about the Federal Budget** as it relates to Real estate:
- Tax-Free First Home Savings Account: Prospective first-time home buyers can now save up to $40,000 in the account. Like an RRSP, contributions would be tax-deductible, and withdrawals to purchase a first home, including investment income will be non-taxable – like a TFSA. Tax-free in, tax-free out. This means that you can deduct contributions for income tax, but the growth in the Tax-Free First Home Savings Account will not be taxable.
- First-Time Home Buyers’ Tax Credit: The First-Time Home Buyers’ Tax Credit amount will be increased to $10,000, providing up to $1,500 in direct support to home buyers. This will apply to homes purchased on or after January 1, 2022.
- Extension of the First-Time Home Buyer Incentive: The First-Time Home Buyer Incentive will be extended to March 31, 2025. The program allows eligible first-time home buyers to lower their borrowing costs by sharing the cost of buying a home with the government (5% or 10%).
Plans to Reduce High Costs of Homes
- A Ban on Foreign Investment in Canadian Housing: The government plans to prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada for a period of two years. Some exceptions apply.
- Property Flipping: Any person who sells a property they have held for less than 12 months would be subject to full taxation on their profits as business income. This will be applicable to residential properties sold on or after January 1, 2023. Exemptions would apply to Canadians who sell their home due to certain life circumstances, such as a death, disability, the birth of a child, a new job, or a divorce.
- Supporting Rent-to-Own Projects: The government plans to invest $200 million in dedicated support under the existing Affordable Housing Innovation Fund to help develop and scale up rent-to-own projects across Canada.
- Home Buyers’ Bill of Rights: The government also plans to engage with provinces and territories to bring forward a national plan to end blind bidding and implement a Home Buyers’ Bill of Rights that will eliminate unfair practices like blind bidding or asking buyers to waive their right to a home inspection.
Multi-generational Home Renovation Tax Credit & Doubling the Home Accessibility Tax Credit
Starting in 2023, under Multi-generational Home Renovation Tax Credit, for those Canadians living with their parents, grandparents or in multi-generational homes, Canada is planning to provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability, .
This Budget also doubles the qualifying expense limit of the Home Accessibility Tax Credit to $20,000 for the 2022 and subsequent tax years to help seniors and persons with disabilities to live and age at home. This means that those planning renovations and upgrades to homes safe and accessible can get a tax credit of up to $3,000. This is an increase from the previous tax credit of up to $1,500.
- A Housing Accelerator Fund: This Fund will create 100,000 net new housing units over five years, through an investment of $4 billion over five years, starting in 2022-23.
- Rapid Housing Initiative: $1.5 billion in new spending is proposed over two years, starting in 2022-23 to create at least 6,000 new affordable housing units, with at least 25 per cent of funding going towards women-focused housing projects.
- National Housing Co-Investment Fund: $2.9 billion in funding, under the National Housing Co-Investment Fund to accelerate the creation of up to 4,300 new units and the repair of up to 17,800 units for the Canadians who need them the most.
- Housing for Indigenous Communities: The Budget proposes $4.3 billion over 7 years towards improving and expanding Indigenous housing in Canada.
- Affordable Housing in the North: Budget 2022 also proposes to provide $150 million over 2 years, starting in 2022-23, to support affordable housing and related infrastructure in the North, of which $60 million would be provided to the Government of Nunavut; $60 million to the Government of the Northwest Territories; and $30 million to the Government of Yukon.
- Long-Term Supports to End Homelessness: The government plans to to spend $562.2 million over 2 years, beginning in 2024-25, to support organizations working to prevent and address homelessness.
** Please note – This information was gathered from reliable sources and reflects my interpretation and opinion of the highlights. It’s important to seek guidance from a tax professional.