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Written by: Tradex

Ahead of our upcoming Applaud Webinar titled “Canadian Housing: An Overview of the Canadian Real Estate Market, Savings Plans, Mortgages, and Related Life Insurance” we’d like to highlight the recent alterations in the federal budget and their impact on the real estate sector, as well as their implications for every day Canadians. With the approaching peak months of real estate activity (June and July), this serves as an opportune moment to evaluate your investments, real estate properties and leverage any tax planning avenues that may be accessible to you.

On April 16, 2024, the Government of Canada released its 2024 Budget, Fairness for Every Generation, which announced a cumulative $8.5 billion in new funding to accelerate and supply 3.87 million new homes by 2032 to confront the housing crisis and to support the policies outlined in Solving the Housing Crisis: Canada’s Housing Plan.

The Budget introduced additional measures aimed at providing direct support to everyday Canadians on the demand side. Specifically for prospective homebuyers, the federal government expanded the Registered Retirement Savings Plan (RRSP) Home Buyers’ Plan (HPB), enabling individuals to withdraw up to $60,000, a notable increase from the previous limit of $35,000. The repayment period is also extended with the 15 installments to commence only after 5 years from withdrawal. This enhancement along with the new tax-free first home savings account (FHSA) available last year will eventually provide eligible “first home” buyers to use up to $100,000 in tax-assisted down payment towards purchasing a home. Complementing this adjustment, the Canadian government announced modifications to the Canadian Mortgage Charter, extending the mortgage amortization period to 30 years. Additionally, existing homeowners stand to benefit from the opportunity to access low-interest loans of up to $40,000 for secondary suite construction, along with renewed interest-free loans of $40,000 under the Greener Homes Affordability Program. In parallel, renters will also see advantages with the introduction of the Renter’s Bill of Rights, which will facilitate the inclusion of their rent payment history in their credit score.

To fund the ambitious goal of supplying 3.87 million new homes, the Budget unveiled plans to raise the capital gains inclusion rate. Individuals will see an increase from the current one-half (50%) to two-thirds (66.7%) for capital gains exceeding $250,000. Similarly, corporations and trusts will also face the 66.7% capital gains tax rate on all realized gains. This adjustment is anticipated to generate approximately $19 billion in revenue over the span of five years. In contrast, the Budget proposed a reduction in the capital gains inclusion rate to one-third on a lifetime maximum of $2 million, aiming to bolster support for start ups, scale-up businesses, and foster entrepreneurship and innovation. The capital gain inclusion rate had been reduced from 75% to 50% in October 2000.

With the implementation of Budget changes effective June 25, 2024, individuals holding unrealized capital gains exceeding $250,000 and/or with investments held in a corporation or trust may find it advantageous to realize some gains to avoid the higher inclusion rate. For those considering this strategy, we encourage you to reach out to us for assistance in mitigating the impact of the Budget’s heightened capital gains taxes before June 24, 2024.

Whether you or your family members are thinking about entering the Canadian housing market or selling your investment property or cottage, Tradex is available to provide support. For more details, join our webinar on May 16, 2024 at 12:00 PM or contact us at / (613) 233 3394