Capital Gains Tax Inclusion
One of the key changes that was announced is the adjustment to capital gains tax, and it will have a considerable impact on those looking to sell investment properties. Here’s how the change could affect profit margins: Personal investment property – taxable income calculation: Current- You decide to sell your investment property for $1,650,000 (which you originally purchased for $1,200,000)
- Taxable gain: 50% of your capital gain is taxable
- Taxable gain calculation: $450,000 (profit) x 50% = $225,000
- You decide to sell your investment property for $1,650,000 (which you originally purchased for $1,200,000)
- Taxable gain: 66.67% of your capital gain in excess of $250,000
- Taxable gain calculation:
- $250,000 x 50% = $125,000
- $200,000 x 66.7% = $133,400
- Total capital gain = $258,400
Good news for First-Time Home Buyers (FTHB)
If you’re looking to get a foot in the door of the Toronto real estate market (and considered a first-time home buyer), there are some great benefits to take advantage of:- Continuation of Tax-Free First Home Savings Account: set aside up to $40,000 ($8,000 per year) towards the down payment of a home
- Home Buyer Plan – applies to the purchase or build of a first home or home for a specified disabled individual
- Withdraw up to $60,000 tax-free from RRSP to fund the purchase (previously $35,000), or $120,000 for couples
- Canadians who make an HBP withdrawal between January 1, 2022, and December 31, 2025, will see their repayment grace period extended by 3 years. These first-time homebuyers will now have up to 5 years (instead of 2) before they need to begin re-payments.
- First-time Home Buyer’s Tax Credit
- $1,500 grant to cover legal bills
Mortgages
- Extending the maximum amortization period from the traditional 25 years to 30 for first-time home buyers who purchase newly built homes – a change that would lower monthly payments (applies to insured mortgages which are open to buyers who put less than 20% of the value of the home in a down payment or on properties worth less than $1,000,000)
- The federal government also signalled it will amend the Canadian Mortgage Charter, introduced in November’s Fall Economic Statement, to offer “permanent” amortization relief to struggling homeowners
- “Where appropriate,” eligible homeowners would be able to apply to their lender for an extended amortization for as long as they need it to make their monthly payments more manageable, according to a release from Finance Canada. The release did not say what criteria homeowners would need to meet to qualify for such relief.
Housing affordability initiatives
To name a few:
- $4 Billion Housing Accelerator Fund to bring more affordable housing units to market
- $14 Billion Affordable Housing Fund
- Canada Builds – partnership with provincial, territorial, and municipal governments
- $40 Billion Apartment Construction Loan Program
- $6B New Canada Housing Infrastructure Fund
- 1,200,000 new homes
- Plan to transition 50% of federal offices
- Canada Post offices
- National Defense properties
- Building apartments, bringing rents down
Additional programs
- Canada Secondary Suite Loan Program via CMHC
- New mortgage flexibilities to add secondary units
- Oil to Heat Pump Affordability program
- Canada Greener Homes Grant
- Extending the Ban on Foreign Buyers of Canadian homes to Jan 1, 2027
- Cracking down on short-term rentals – deny income tax expenses on short-term rentals, supported by a $50 million short-term rental enforcement fund
- Financialization of Housing – restrict purchase and acquisition of existing single-family homes by very large corporate investors
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