2022 Federal Budget Highlights
The budget focused on affordable housing and transitioning to a green economy. While there were no changes to the federal personal or corporate tax rates in the 2022 federal budget, I have highlighted some of the changes that may impact individuals.
Tax-Free First Home Savings Account (FHSA) - Provides financial help for first time home buyers allowing them to make contributions of $8,000 a year up to a maximum of $40,000. Taxpayers can make up to $8,000 a year of tax deductible contributions, income earned in the account is not subject to tax and withdrawals to purchase a first home are non-taxable. Unused contribution room will not be carried forward and contributions to FHSA can not be made before 2023. Individuals will not be able to make a FHSA withdrawal and a Home Buyers' Plan withdrawal for the same qualifying home purchase.
Home Buyers' Tax Credit increase - The credit increased from $5,000 to $10,000 providing eligible first time home buyers with up to $1,500 in tax savings. This applies to purchases of a qualifying home made on or after January 1, 2022.
Anti-house flipping rule- This will apply to those that sell residential property they have owned for less than 12 months. It would preclude them from claiming the principle residency election, resulting on full taxation on any gain.
Multigenerational Home Renovation Tax Credit- The new tax credit is meant to support home renovations to create a secondary dwelling unit for a senior or family member with a disability. It provides a 15% tax credit on eligible renovation expenses up to $50,000 on certain projects.
Medical Expense Tax Credit for surrogacy - The budget expands the eligible medical expenses related to a surrogate mother or donor of sperm, ova or embryo for the Medical Expenses Tax Credit.
There were minimal changes in the budget affecting small businesses. The budget did introduce changes allowing medium sized Canadian Controlled Private Corporations (CCPCs) to benefit from the small business deduction. Previously the small business deduction was phased out when the combined taxable capital employed in Canada of the CCPC and associated corporations was between $10M to $15M. The budget introduced a new range of $10M to $50M. This will apply to taxation years that begin on or after April 7, 2022
