Thanks to legislation that has currently passed the second reading in the House of Commons, first-time homebuyers may be able to tap into both their Home Buyers’ Plan (HBP) and first home savings account (FHSA) contributions when making the same home purchase.
Before this, the draft FHSA legislation limited first-time homebuyers from accessing both funds for the same home purchase. Now, amendments to Bill C-32 will make it possible for homebuyers to tap into both funds in raising the down payment for a new home.
The HBP enables first-time homebuyers to withdraw up to $35,000 from a registered retirement savings plan (RRSP) to put towards buying a home. The FHSA allows first-time homebuyers to save towards a down payment for the purchase of a first home. Both contributions are tax deductible, with the withdrawals being non-taxable.
Account holders can save up to $8,000 annually, with lifetime contributions capped at $40,000. With the two funds combined, first-time homebuyers will be able to use up to $75,000, plus any growth in the FHSA, as a down payment for a new home.
Account holders are also granted more flexibility as FHSA permits them to transfer funds to an RRSP and from an RRSP to their FHSA, tax-free. They are however required to comply with the annual deduction limits.
To further aid more young Canadians access housing, the government has also decided to ban foreign purchases of homes in the country. This measure is expected to help in ensuring sufficient stocks of domestic housing for Canadians who can move into the residencies rather than have the properties sit idle and empty.
The government is also planning to introduce a refundable multigenerational home renovation tax credit. This credit is intended to help families with up to $7,500 that can be used to build accommodations for a senior or an adult with a disability.
The new residential property flipping rule will also be of concern to real estate speculators. The government is seeking to ensure that profits from flipping residential properties that have been held for less than 12 months are fully taxed as business income. This will also apply to residential properties that are being held as rental investments. There will be exemptions allowed in cases of disability, death, the birth of a child, separation, personal safety concerns, employment changes, insolvency, or involuntary disposition. This rule is expected to apply to residential properties that are sold from January 1, 2023.
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