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Watch: Columnist Rob Carrick explains the proposed Tax-Free First Home Savings Account, and other budget measures that affect your personal finances.

The Globe and Mail

The federal budget promises $10-billion to make housing more affordable, $5.3-billion to provide dental care for lower-income Canadians, a sprinkling of new tax measures for individuals and the creation of an independent complaints body to address consumer complaints involving banks.

Measures aimed at taming home prices are the centrepiece of the Trudeau government’s latest budget, with pledges spanning billions of dollars for new home construction, curbs on speculation and foreign buyers, and help for Canadians hoping to buy their first home, including a new Tax-Free First Home Savings Account.

With some exceptions, the federal government is also proposing to tax the sale of principal residences for homeowners who hold a property for less than 12 months, a key election-platform promise meant to discourage house flipping.

There is also significant funding for the recently announced dental-care program, a key priority for the New Democratic Party, which recently agreed to a multiyear co-operation deal with the minority Liberal government.

Many of the proposed federal tax tweaks are aimed at current and prospective homeowners. Beyond housing, the budget contains tax breaks for surrogacy- and other fertility-related expenses. It also pledges to nix the excise duty on low-alcohol beer.

Here’s more detail on some of the key measures that might affect Canadians’ pocketbooks.

Building new homes

To help ease price pressures in Canada’s real estate market, Ottawa would provide $4-billion through Canada Mortgage and Housing Corp. to build 100,000 new homes in the next five years. Another $1.5-billion would serve to create 6,000 affordable housing units over the next two years.


Multigenerational Home Renovation Tax Credit

This is a refundable tax credit for Canadians who are taking home building into their own hands. Families who are constructing a secondary suite for a senior or adult with a disability would be able to claim 15 per cent of up to $50,000 in eligible renovation and building costs, resulting in up to $7,500 worth of savings.

Tax-Free First Home Savings Account

Starting in 2023, first-time home buyers would be able to save up to $40,000 in a new account. As with a registered retirement savings plan, contributions – in this case, up to a maximum of $8,000 a year – would be tax-deductible. And, as with a tax-free savings account, withdrawals would be tax-free. Investment growth inside the account would also be tax-free.

Doubling the First-Time Home Buyers’ Tax Credit

First-time buyers who’ve purchased a property on or after Jan. 1 would be able to claim $10,000 – up from the current $5,000 – which would double the maximum non-refundable tax rebate from $750 to $1,500.

First-Time Home Buyer Incentive extended until early 2025

The Liberal government’s shared-equity mortgage for first-time buyers, which was first introduced in the 2019 budget, will be available until the end of March, 2025, the budget said.

Under the program the government or a mortgage provider covers part of a first home purchase in exchange for what amounts to an equity stake in the property. While the arrangement allows home buyers to take out a smaller mortgage with lower monthly payments, uptake so far has been far below expectations, a recent Globe and Mail analysis showed.

The budget promises to tweak the incentive to make it more appealing.


No principal residence exemption for properties bought and sold within 12 months

The sale of a principal residence is famously tax-free in Canada. While you may have to pay taxes on any gains from the sale of an asset such as a stock or a vacation property, any profit from selling the home you’ve been living in is exempt from tax.

The budget proposes taxing the sale of a home designated as a primary residence if it’s been held for less than 12 months. The measure is aimed at discouraging house-flipping, the rapid buying and selling of a property to capture gains in a fast-appreciating real estate market.

While the Canada Revenue Agency has long taken a dim view of home-flippers who abuse the definition of principal residence, the new measure might help crystallize when the tax exemption does and does not apply, according to some real estate commentators.

Still, Canadians who are forced to sell their home within 12 months owing to circumstances such as a death, disability, a new job, divorce or the birth of a child, among other possible exceptions, would be spared from having to pay the tax.

A two-year ban on foreign buyers

In keeping with another election promise, the budget envisions a two-year freeze of purchases of residential property by foreign individuals and entities. Exceptions include recreational real estate and purchases by individuals who live in Canada and have work permits and international students who are on track to become permanent residents, in certain cases.

Sales taxes on assignment sales

Buying a preconstruction condo unit and selling it before it’s finished has been a popular way for real estate investors to reap large gains in some of Canada’s hottest markets. Currently, sales taxes don’t apply to so-called assignment sales if the buyer initially intended to live in the home. The budget argues that “this creates an opportunity for speculators to be dishonest about their original intentions.” Instead, it proposes making all assignment sales subject to sale taxes effective May 7.

Doubling the home accessibility tax credit

Seniors would be able to claim a maximum of $20,000 worth of expenses for upgrades such as walk-in bathtubs and wheelchair ramps that make their homes more accessible. The new ceiling would be double the current cap on eligible expenses and would result in a maximum tax credit of $3,000.

Dental care

The new dental plan is aimed at those with an annual income of less than $90,000, with no co-payments for anyone making less than $70,000 a year. Coverage would start with children under 12 years old in 2022; expand to kids under 18, seniors and individuals with disabilities in 2023; and reach full implementation by 2025.

Tax breaks for surrogate-related expenses and fertility clinic fees

The measure would allow Canadians to claim expenses related to a surrogate mother or a sperm, ova or embryo donor for 2022 and subsequent years. Also, fees paid to fertility clinics or donor banks to obtain donor sperm and ova would become eligible to qualify for the Medical Expense Tax Credit.

Low-alcohol beer

The budget would also axe the excise duty on beer with no more than 0.5-per-cent alcohol, bringing it in line with the tax treatment of wine and spirits with the same alcohol content.

A new bank ombudsman

Canadians who have a beef with their bank may take the matter to an external ombudsman. The country currently has two bodies in charge of reviewing complaints: the Ombudsman for Banking Services and Investments (OBSI) and the ADR Chambers Banking Ombuds Office (ADRBO). While both are funded by the industry, OBSI operates as a not-for-profit while ADRBO is a private, for-profit entity whose quality of service received a scathing review in 2020 from the Financial Consumer Agency of Canada.

The budget proposes instituting a single, non-profit body to address consumer complaints. Still, the government’s wording suggests the measure might be at the idea stage for now.

“Budget 2022 announces the government’s intention to introduce targeted legislative measures to strengthen the external complaints handling system,” the document reads. It does not provide a timeline.


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