The federal government announced its 2024 budget earlier this month, with many updates aimed at housing. The Liberal government’s approach to solving the housing crisis in Canada includes three steps: building new houses, making it easier to rent or own a home, and helping Canadians afford a home.
Here are the highlights for first-time home buyers and current homeowners.
Changes to the capital gains tax
This change particularly affects those selling investment properties. Here’s a summary of the key points:
- Current Rule:
- For personal investment properties, 50% of capital gains are taxable.
- Example Calculation: Selling a property for $1,650,000 that was purchased for $1,200,000 results in a taxable gain of $225,000 (50% of $450,000 profit).
- New Rule (Effective June 25, 2024):
- The taxable gain will be 66.67% on the amount of capital gain that exceeds $250,000.
- Example Calculation: The first $250,000 of gain is taxed at 50% ($125,000), and the remaining $200,000 of gain is taxed at 66.67% ($133,400), totalling $258,400.
- Impact: Under the new rule, the seller will pay an additional $33,400 in taxes compared to the current rule.
- Changes for Corporations and Trusts:
- The capital gains inclusion rate will increase from 50% to 66.67%.
These adjustments signify a considerable impact on profit margins for individuals and entities selling investment properties.
RRSP changes for first-time home buyers
Previously, as part of the Home Buyers’ Plan, the maximum amount first-time home buyers could withdraw from their Registered Retirement Savings Plan (RRSP) for a down payment was $35,000 — effective April 16, this amount has been raised to $60,000 to help with rising home prices.
In addition, those who withdraw between January 1, 2022 and December 31, 2025, now have five years to begin repayments instead of two.
Amortization schedule extension
Starting August 1, mortgage insurance rules on new builds will allow for 30-year mortgage amortizations for first-time home buyers. Currently, the longest allowable amortization is 25 years with a 20% down payment.
Mortgage renewal updates
According to the Canadian Mortgage Charter, banks are supposed to inform homeowners of their mortgage renewal date and options four to six months in advance. Lenders are now expected to contact borrowers up to 24 months in advance — but Finance Minister Chrystia Freeland explained that though the banks are meant to follow the charter, it is not a law.
Proposed enhancements to the charter are also meant to encourage lenders to provide appropriate relief measures, such as allowing temporary extensions and waiving fees and costs.
Canada Green Buildings Strategy
This strategy should lower energy bills and reduce emissions. Though details are yet to come, the program will support energy-efficient retrofits for both homeowners and renters and encourage better, more efficient buildings.
Low-cost financing for additional suites
To combat the housing shortage, the 2024 budget proposed a Canada Secondary Suite Loan Program, which would encourage homeowners to add a secondary suite to their homes by accessing up to $40,000 in low-interest loans.
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