Housing affordability is a significant concern for many Canadians, especially the younger generation. Residential real estate prices have climbed at a rate that far exceeds the average wage growth, making home ownership an unattainable goal for many. To address housing issues, the federal government has announced and implemented various tax measures over the last few years, ranging from increased taxes on residential property flippers to the First-Home Savings Account (FHSA).
Multigenerational Home Renovation Tax Credit
If you already own a home and are considering adding a secondary suite for aging parents or a related adult with a disability, the Multigenerational Home Renovation Tax Credit (MHRTC) can offer substantial tax savings.
First-Home Savings Account
The FHSA, available since 2023, is an account that can accelerate your ability to save for the purchase of a first home. The FHSA allows eligible individuals to make tax-deductible contributions, up to certain limits—much like a Registered Retirement Savings Plan (RRSP). Qualifying withdrawals from an FHSA are not taxable, similar to a Tax-Free Savings Account (TFSA).
As a prospective first-time home buyer, you may be wondering whether it is most beneficial to contribute to the new FHSA, the TFSA, or participate in the Home Buyers’ Plan as part of your RRSP.
Underused Housing Tax
The underused housing tax (UHT) is a 1% tax on vacant or underused residential real estate owned by non-Canadians. If you own residential property in Canada as a foreign owner, you may be impacted by this tax and the related filing requirements.
Residential property flipping
Under the new flipped property rule that came into effect for 2023, a gain from the disposition of a residential property that was owned for less than 365 days is fully taxable as business income, with limited exceptions. This means that the gains on such dispositions would not be eligible for capital gains treatment or the principal residence exemption.
Residential real estate investors – Short-term rentals
If you own an investment property that is offered for rent on a short-term basis (less than 90 consecutive days), you should be aware of the proposed changes to deny expense deductions on non-compliant short-term rentals. The proposed effective date is January 1, 2024, with transitional relief available only for 2024.
Businesses involved in real estate – Rental property builders
Builders of new residential rental properties may benefit from GST relief on certain new purpose-built residential rental housing.
BDO can help
Our Tax team can help you stay on top of the most recent tax changes that could impact you and your business. If you have any questions about any of these recent housing tax measures, please contact us.
Debra Moses
Christopher Ng
BDO in Canada