The federal government introduced several changes to the tax system and tax incentives this year. The expert tells CBC News that tax changes related to housing are notable.
a first residential savings account (FHSA), Increased taxes on home flipping When Tax on unused or underused housing is one of the new measures currently in place.
first residential savings account
FHSA allows certain homebuyers to save up to $40,000 toward a home purchase with annual contributions of up to $8,000 over five years. Contributions to the FHSA are tax deductible and withdrawals for home purchases are tax exempt.
Hugh Woolley, a Vancouver-based CPA, says it’s important to note that the FHSA isn’t just for first-time homebuyers. Those who have not owned a home for four years or more are also eligible.
“So this also applies to people who are trying to reenter the housing market, who have been out of the housing market for years,” said Woolley.
Another new tax incentive related to housing is the Multi-Generation Home Improvement Tax Credit.
The refundable tax credit will provide up to $7,500 “to help build secondary suites for seniors or adults with disabilities to live with their families,” Finance Canada said in an email.
Eligible families can claim 15% of the home renovation and construction costs up to $50,000 to construct a secondary residential suite.
Vacant house, new tax on empty house
The government introduced new rules in the 2022 budget, effectively raising the tax on home flipping.
With this change, the government will consider anyone who sells a home that has been owned for less than 12 months to be deemed to have resold the property. Proceeds from the sale are considered business income, not capital gains.
Dan Rogozinski, co-director of the master’s program in accounting at the University of Waterloo, said the government hopes the measure will help slow the rise in Canadian house prices.
“They don’t like this reversal because it creates demand and pushes prices up,” Rogozinski said.
However, there are some exceptions to this change, such as selling a home due to death or divorce.
Woolley said home flippers will likely look for ways to avoid paying taxes.
“I think a lot of people will sell within a year. [and] We will be able to come up with some reason as to why these rules don’t apply,” he said.
The government has also introduced an Unused Housing Tax (UHT).
“The UHT is a national 1% annual tax on the value of vacant and underutilized residential property in Canada owned directly or indirectly by non-resident non-Canadian citizens,” said Finance. Canada said in an email.
Non-Residents, Non-Canadians who own underutilized or vacant homes in Canada as of December 31, 2022 must complete the UHT Declaration for their property by April 30, 2023. must be submitted.
UHT has some exceptions. These include exceptions for seasonal properties and properties made inaccessible due to hazards.
Woolley said the extent of the exemption for UHT is noteworthy.
“One of the dangers of these rules is that the more exemptions you offer, the more tax planners and smart and cunning people will say, ‘Well, this is how you get around these rules. I think,” said Woolley. He said.
Rogozynski said tax increases are likely in the next few years.
“I don’t understand why voter turnout hasn’t gone up from 1% to 2% to 3% because they’re foreigners with no name and no face. They don’t vote,” he said.
Other changes
The federal government indexes individual income tax brackets and many tax incentives for inflation. This year he will increase by 6.3%. According to the Canada Revenue Agency.
Rogozinski said it was a much higher jump than normal.
“This is three times what we normally see in the last 40 years,” he said.
“So those of you who work in Canada today probably haven’t seen that kind of inflation factor going on.”
The base personal amount, tax-exempt income, increased from $14,398 in 2022 to $15,000 this year.
Overall, Rogozynski said this year’s tax changes are modest.
“There is a possibility of a recession [in 2023]Now is not the time to introduce mass new price increases,” he said.
