The government is moving forward with something it introduced in the course of the campaign last year – a Duty Free First Home Savings Bank. The budget provided some basic details. From next year, Canadians will be eligible to contribute up to $ 8,000 a year to their accounts, allowing them to save and invest money to buy a home in the most tax-friendly way. At present, Canadians can use anything from a savings account to the RRSP or TFSA to save for their first home, but everything comes with a certain amount of tax restrictions. RRSPs provide a tax deduction when people contribute, but any money withdrawn from them under the existing Home Buyer program must be replenished later without the tax exemption. On the other hand, Canadians who use their TFSA to save for a home can raise these funds in a tax-protected way, but they do not receive the tax exemption when they make the investment. The new program adopts the most attractive parts of these two programs, giving savers a tax deduction for their contribution and also allowing these savings to increase without being taxed on profit. It is “tax-free means, tax-free”, as set by the budget. The government estimates that the tax-free First Home Savings program will cost it about $ 725 million in tax revenue. Finance Minister Chrystia Freeland said the government sees this as well-spent money. “We will make it easier for our young people to get their first keys,” he said of the government’s various housing initiatives, which he described as “perhaps the most ambitious plan Canada has ever had.” CLOCKS Shoppers say they hope the budget will help:
First time buyers say they need help
Apoorva and Dnyanada Pande say they hope Thursday’s federal budget includes aid for prospective home buyers. 0:38
The new account may be great news for savers, but it will not do much to improve the affordability of those who do not have the money.
“I think it’s going to be huge,” said Jamie Golombek, head of tax planning and land registry at CIBC. “But if you do not have money, this plan will do you no good.”
Other initiatives
The budget is once again targeting some old home enthusiasts who have been accused of high prices in the past: flippers, speculators, blind offers and foreign buyers. The government is proposing a two-year ban on the purchase of residential real estate by individuals and companies who are not citizens or permanent residents. Refugees, some international students and those with work permits will be excluded from politics. Note that the ban would not include leisure properties such as cottages, cabins and other cottages. It is a populist policy that will surely resonate with many, but previous versions of such plans have not had much impact. A Statistical Service of Canada report found that less than 5 percent of homes in Toronto and Vancouver were owned by non-residents. The budget also includes a commitment that anyone who buys and sells a property within a year “will be deemed to be subverting real estate and will be subject to full taxation on their profits”. Government officials say this is mainly a matter of enforcing existing tax rules. The government has also promised to present a Housing Buyer Declaration that will include, among other initiatives, the termination of blind bidding – the practice in many Canadian jurisdictions that forces prospective home buyers to make offers without knowing what others are offering. This is an idea that brokers also come up with. The Canadian Real Estate Association announced before the budget that it plans to implement a pilot program this year to feature real-time bid tracking in home listings. “This opportunity is apt and appropriate for our market,” said Jeff King, CEO of the Greater Vancouver Real Estate Council. in a newsletter this week.
Expenditure on the supply side as well
All of these initiatives target the demand side of the equation. On the supply side, the budget set an ambitious plan to build many homes quickly. Canada now builds about 200,000 new homes a year – a rate the government says is far below what it needs. Thus, Ottawa has allocated about $ 10 billion in various initiatives to put shovels in the ground. Most of that money is used to fund affordable housing commitments, fix repair delays, and encourage Canadians to renovate their homes, including tax deductions of up to $ 7,500 to build a minor or senior suite with seniors. disability. The hope is to double the rate of housing construction to 400,000 new homes a year, enough to make a dent in the more than 3 million new homes that the government says will require forecasts over the next decade. This may sound great to those who have been knocking on the drum for years for lack of supply, but Golombek suggested that a new savings account with the words “tax-free” in the name is likely to get more attention. “There is not much in this budget for the average taxpayer, but for someone considering buying their first home, the availability of this program will definitely be a way to start these savings,” he said.
