2022 Federal Budget ~ Housing Affordability Improvements

2022-04-08 | 13:28:10

I received an article from RBC Wealth Management that does a great job of explaining the 2022 Federal Budget and it’s measures to improve housing affordability. As always, please feel free to call or email at any time if you would like to discuss anything related to your own mortgage requirements in more detail.

RBC writes: 

On April 7, 2022, Deputy Prime Minister and Minister of Finance Chrystia Freeland released the federal budget, the first since the 2021 Federal Election. While this is another Liberal minority budget, it was tabled just weeks after the Liberal Party and New Democratic Party announced a Supply and Confidence Agreement to support the current government until June 2025. 

While this budget shifts away from pandemic measures, other current events and realities are at the forefront. These include inflation, housing affordability, the transition to a green economy, and supporting Ukraine in the face of an invasion that has upset the rules of international order we have relied on since World War II. 

With a focused theme of “make life more affordable,” the budget contains only a few new or increased taxes, targeted at financial institutions and life insurance companies, and does not change federal personal or corporate tax rates. However, medium-sized business owners are promised increased access to small business tax rates on their first $500,000 of taxable income.

A great deal of emphasis in the budget is on new spending aimed at housing affordability, a national dental plan and defense spending. Long-rumoured changes including an increase to the inclusion rate on capital gains and changes to the principal residence exemption were once again not on the agenda. Instead, there was a sprinkling of new measures and credits across the board.  

The following is a summary of the most significant tax and financial planning measures announced in the budget.

Housing measures

Tax-Free First Home Savings Account (FHSA)

The budget proposes to create the FHSA, a new registered account to help individuals save for their first home. Contributions to an FHSA will be deductible and income earned in an FHSA will not be subject to tax. Qualifying withdrawals from an FHSA made to purchase a first home will be non-taxable. 

Some features of the FHSA were provided in the budget, which are summarized below. However, the government indicated more information will be provided in the near future.


  • You must be a Canadian resident and at least 18 years of age to open an FHSA
  • You must not have lived in a home that you owned either at any time in the year the account is opened or during the preceding four calendar years
  • You will be limited to making non-taxable withdrawals in respect of a single property in your lifetime. Once you have made a non-taxable withdrawal to purchase a home, you will be required to close your FHSA within a year from the first withdrawal and will not be eligible to open another FHSA


  • You can make contributions of up to $8,000 per year to an FHSA starting in 2023
  • There is a lifetime contribution limit of $40,000
  • If you contribute less than $8,000 in a given year, the excess will not be carried forward
  • If you open more than one FHSA the total amount contributed to all the FHSAs cannot exceed the annual and lifetime contribution limits

Withdrawals and transfers

  • Qualifying withdrawals from the FHSA made to purchase a first home will be non-taxable
  • Non-qualifying withdrawals for other purposes will be taxable
  • You will not be permitted to make both an FHSA withdrawal and a withdrawal under the Home Buyers’ Plan (HBP) in respect of the same qualifying home purchase
  • You may transfer funds from an FHSA to a registered retirement savings plan (RRSP) or to a registered retirement income fund (RRIF). Transfers to your RRSP or RRIF would be on a tax-deferred rollover basis, however, these amounts when withdrawn from your RRSP or RRIF will be taxable in the usual manner
  • Transfers to your RRSP and RRIF will not reduce, or be limited by, your available RRSP room
  • Withdrawals and transfers will not replenish FHSA contribution limits
  • If you have not used the funds in your FHSA for a qualifying first home purchase within 15 years of first opening an FHSA, your FHSA must be closed
  • Any unused savings may be transferred into an RRSP or RRIF, or would otherwise have to be withdrawn on a taxable basis
  • You will be allowed to transfer funds from an RRSP to an FHSA on a tax-deferred basis, subject to the $40,000 lifetime and $8,000 annual contribution limits. These transfers will not restore your RRSP contribution room


You and your spouse each contribute $8,000 per year (the annual maximum) in your own FHSA starting in 2023. Both of you can deduct the contribution from your taxable income each year. The tax savings on your federal tax return each year will be based on your marginal tax rate. For example, if each of you make between $50,000 and $100,000, the FHSAs allows each of you to receive an annual federal tax refund of $1,640 (i.e. $8,000 x 20.5 percent). At the end of 2027, when you are ready to buy your first home, your combined FHSA amounts to $90,000, which includes $10,000 of tax-free investment income earned in the plan. You can withdraw this amount tax-free for a down-payment on your first home.

The government will work with financial institutions with the goal to have the infrastructure in place for individuals to be able to open an FHSA and start contributing at some point in 2023.

Doubling the First-Time Home Buyers’ Tax Credit (HBTC)

The HBTC is intended to provide support to Canadians buying their first home. The budget proposes to double the HBTC amount to $10,000, which would provide a 15 percent non-refundable tax credit of $1,500. You can continue to split the credit with your spouse or common-law partner as long as the combined total does not exceed $1,500.

You are a first-time home buyer if neither you nor your spouse or common-law partner owned and lived in another home in the calendar year of the home purchase or in any of the four preceding calendar years. This credit is also available for certain acquisitions of a home by or for the benefit of a disabled individual, even if the first-time home buyer condition is not met. A qualifying home is one that you or your spouse or common-law partner intend to occupy as your principal residence no later than one year after its purchase.

This measure will apply to homes purchased on or after Jan. 1, 2022.

Doubling the Home Accessibility Tax Credit (HATC)

The HATC is a non-refundable tax credit that helps support independent living for seniors who are 65 years of age or over at the end of a tax year and those who are eligible to claim the Disability Tax Credit (DTC) at any time in a tax year. The HATC is available for eligible home renovation or alteration expenses in respect of an eligible dwelling.

The budget proposes to double the annual expense limit of the HATC to $20,000 for the 2022 and subsequent taxation years. The credit is 15 percent of the lesser of eligible expenses and $20,000, resulting in a tax credit of up to $3,000, for accessibility renovations or alterations.

Multigenerational Home Renovation Tax Credit (MHRTC)

To support families who are living together in multigenerational homes, the budget proposes to introduce the MHRTC, which would provide a refundable credit of up to $7,500 for constructing a secondary suite for a senior or an adult with a disability living with a relative. The credit would allow families to claim 15 percent of up to $50,000 in eligible renovation and construction costs incurred in order to construct a secondary suite.

This measure will apply for the 2023 and subsequent taxation years.

Support for those in housing need

The government recognizes that many Canadians are struggling with housing costs and are in need of additional assistance. The budget proposes to provide a one-time $500 payment to those facing housing affordability challenges. The specifics and delivery method will be announced at a later date.

Residential property flipping rule

Property flipping involves purchasing real estate with the intention of reselling the property in a short period of time to realize a profit. Profits from flipping properties are fully taxable as business income, meaning they are not eligible for the 50 percent capital gains inclusion rate or the Principal Residence Exemption (PRE).

To ensure profits from flipping residential real estate are always subject to full taxation, the budget proposes to introduce a new deeming rule. Specifically, profits arising from dispositions of residential property (including a rental property) that was owned for less than 12 months will be deemed to be business income.

The new deeming rule would not apply for individuals who sell their home due to certain life events such as death, household addition, separation, personal safety, disability or illness, employment change, insolvency or involuntary disposition. Exemptions will be set in forthcoming rules and there will be a consultation period for the draft legislative proposals.

Where the new deeming rule applies, the PRE would not be available. Where the new deeming rule does not apply because of a life event listed above or because the property was owned for 12 months or more, it would remain a question of fact whether profits from the disposition are taxed as business income.

The measure will apply in respect of residential properties sold on or after Jan. 1, 2023.

Ban on foreign investment in Canadian housing

To ensure housing is affordable to Canadians, the government proposes restrictions that will 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.

Exemptions to the ban will be provided to those who have been authorized to come to Canada under emergency travel while fleeing international crisis and international students who are on the path to permanent residency in certain circumstances.

The government will continue to monitor the impact that foreign investment is having on Canadian housing costs and may introduce additional measures to strengthen the proposed ban. Non-Canadians who own homes that are being underused or left vacant will be subject to the Underused Housing Tax that was announced in the 2021 budget.


 Again, please let me know if you have any questions, anytime...I'm here to help!

~ Patrick



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