Potential Tax Changes from 2021 Election Results
1. A New Tax on Principal Residences for Some.
House flippers beware: a new “Anti-house flipping tax” will deny the principal residence exemption starting in 2022. A capital gain, currently taxed at a 50% income inclusion rate, will be imposed if the owner flips the home within 12 months of purchase or transfer of title. However, as the NDP has indicated in its platform the intention to increase the capital gains inclusion rate to 75% immediately after the election, this new tax could well become very expensive very shortly. It is expected that there will be a behavioral response to this proposal; that homeowners will simply wait beyond the 12-month period to sell their properties in order to preserve their access to the principal residence exemption. There are also some exceptions to this proposal.
2. A New Registered Home Savings Account (RHSA)
For first time buyers under the age of 40, starting July 2022, the contributions made to this account will count towards unused RRSP contribution limit. The contributions will be used as a deduction from income, making them tax free. If the funds are used to purchase a first home, they do not have to be repaid. Funds can be transferred into the account from an RRSP. There are some restrictions: at least 50% of these funds must be invested in the home for at least 4 years. Further, no fund withdrawals will be allowed within one year of contribution.
3. A Plethora of Niche Tax Credits.
• Enhanced Home Accessibility Tax Credit.
Currently $10,000 this non-refundable tax credit is expected to double to $20,000.
• First Time Home Buyers Tax Credit.
This non-refundable tax credit will be doubled from $5000 to $10,000.
• New Multi-generational Home Renovation Tax Credit.
The government expects to make a 15% tax credit for up to $50,000 spent in renovation and construction costs to add a second unit to property for the purposes of multigenerational living. This will provide up to $7500 in tax support in 2022.
4. Elimination of Flow Through Shares for Oil, Gas, and Coal.
This provision was promised as a climate action incentive, to reduce the tax breaks offered to oil, gas and coal companies. It appears that these flow through shares will continue in the mining (base metals, precious metals, uranium) sector, along with renewable energy companies.
If you wish to see the full report and take a look at the full list of expected changes, please let me know.
Until next month,