With a commitment to a two-year ban on foreign buyers, the Liberals are making housing affordability a priority in their fiscal 2022 budget.
Thursday’s budget outlined the federal government’s plans for tackling skyrocketing housing costs – including a temporary ban on foreign buyers, a crackdown on speculators, a pledge to double construction of new homes, and a tax-sheltered way for Canadians to save up for a down-payment.
Government is moving forward with a tax-free first home savings account it floated during the election campaign last year. Some details were provided in the budget.
Canadians will be able to contribute up to $8,000 to these accounts starting next year, which will allow them to save and invest funds in order to buy a home while taking advantage of all tax advantages. Savings accounts, RRSPs, and TFSAs are all options that Canadians have to use when saving for their first home, but all come with some tax restrictions.
Contributions to RRSPs are tax deductible, but money withdrawn under the existing Home Buyer’s plan must be replenished later without the tax deduction. On the other hand, Canadians who use their TFSAs to save for a home can grow their funds tax-free, but they do not receive a tax break when they invest.
The new program incorporates the best features of these two programs by giving savers a tax rebate for contributing and also allowing those savings to grow tax-free. As the budget says, “tax-free in, tax-free out.”
Contributions to tax-free First Home Savings Accounts are limited to $40,000 per person, and tax revenue is estimated at $725 million per year.
According to Canada’s finance minister, Chrystia Freeland, the government considered the expenditure to be well spent.
Various government housing initiatives, she said, will make it more likely for Canadian youth to own their own houses in the future, calling it “perhaps Canada’s most ambitious plan ever.
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