Federal Budget Updates 2022
This bright industry is constantly evolving and growing at a rapid pace. In our previous Federal Budget Updates blog from 2019, we had discussed updates that were made to the CMHC First Time Home Buyer’s Incentive Plan and Home Buyer’ plan RRP Increase. We will be diving a bit deeper into a few key updates from 2022. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding the Federal Budget Updates 2022.
On April 7, 2022, the Deputy Prime Minister and Finance Minister, the honourable Chrystia Freeland, presented Federal Budget Updates 2022: A Plan to Grow Our Economy and Make Life More Affordable, to the House of Commons. No changes were made to personal or corporate tax rates, nor to the inclusion rate on taxable capital gains.
Some highlights that are included in this Federal Budget Updates are:
Federal Budget Updates: Retirement Plans
Borrowing by Defined Benefit Pension Plans
- Budget 2022 proposes to provide more borrowing flexibility to administrators of defined benefit registered pension plans (other than individual pension plans) for amounts borrowed on or after April 7, 2022
Reporting Requirements for RRSP’S AND RRIF’S
- Budget 2022 proposes to require financial institutions to annually report to CRA the total fair market value of property held in each RRSP and RRIF at the end of the calendar year. This information would assist CRA in its risk-assessment activities regarding qualified investments held by RRSPs and RRIFs. This measure would apply to the 2023 and subsequent taxation years
Federal Budget Updates: Personal Measures
Homebuyer’s Tax Credit
- By claiming this credit, first-time homebuyers can obtain up to $750 in tax relief as a non-refundable tax credit. Budget 2022 proposes to double the Home Buyers’ Tax Credit amount such that eligible homebuyers can access tax relief of up to $1,500. This measure would apply to acquisitions of a qualifying home made on or after January 1, 2022.
Multi-Generational Home Renovation Tax Credit
- Budget 2022 proposes a new refundable tax credit to support constructing a secondary suite for an eligible person to live with a qualifying relation. An eligible person would be a senior (65+ years of age at the end of the tax year when the renovation was completed) or an adult (18+ years of age) eligible for the disability tax credit. A qualifying relation would be 18+ years of age and a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the eligible person (which includes the spouse or common-law partner of one of those individuals). This tax credit would provide tax relief of 15% on up to $50,000 of eligible expenditures, providing a maximum benefit of $7,500.
Tax-Free First Home Savings Account (FHSA)
- See below…
The Federal Budget Updates 2022 propose to create the Tax-Free First Home Savings Account to help first-time homebuyers save up to $40,000 for their first home. Contributions to an FHSA would be deductible (like an RRSP), and income earned in an FHSA and qualifying withdrawals from an FHSA made to purchase a first home would be non-taxable (like a TFSA).
The lifetime limit on contributions would be $40,000, subject to an annual contribution limit of $8,000. Unused annual contribution room would not be carried forward. Individuals would also be allowed to transfer funds from an RRSP to an FHSA tax-free, subject to the $40,000 lifetime and $8,000 annual contribution limits.
Withdrawals for purposes other than to purchase a first home would be taxable. However, an individual could transfer funds from an FHSA to an RRSP (at any time before the year they turn 71) or an RRIF on a non-taxable basis. Transfers would not reduce, or be limited by, the individual’s available RRSP room. Withdrawals and transfers would not replenish FHSA contribution limits.
Individuals would not be permitted to make both an FHSA withdrawal and a home buyers’ plan withdrawal concerning the same qualifying home purchase. If an individual has not used the funds in their FHSA for a qualifying first home purchase within 15 years of opening an FHSA, their FHSA would have to be closed. Any unused funds could be transferred into an RRSP or RRIF or would otherwise have to be withdrawn on a taxable basis.