New Savings Options and Tax Changes For 2023

It’s not often that a new calendar brings interesting new savings and tax changes, but 2023 is an exception.  Beyond the usual inflation-adjusted increases for personal tax exemptions, CPP & OAS income, and RRSP & TFSA contribution allowances, there are 3 additions worth noting.  Sure, the federal inflation adjustment of 6.3% is worth noting (for the last decade it was around 2%), but given the year we have just had, this increase is not a surprise.  Nonetheless, the 3 items worth noting are all related to real estate ownership, upgrades, and taxation.

The First Home Savings Account (FHSA) is expected to be officially launched this spring.  This new account provides first-time homebuyers the ability to save $40,000 on a tax-free basis for the purchase of a first home in Canada.  The contributions will be tax-deductible (like an RRSP), and the withdrawals will be non-taxable (like a TFSA).  Thus, it provides an attractive tool for accumulating savings for a down-payment, and it can be done in concert with the RRSP Home Buyer’s Plan (HBP).

The Multigenerational Home Renovation Tax Credit (MHRTC) provides a tax credit equal to 15% of eligible expenses up to $50,000 (for a maximum of $7,500) spent on a home renovation that creates a “secondary dwelling” allowing an eligible individual (a senior or a person with a disability) to live with a family member.  Given the aging baby-boomer population, this could greatly improve care affordability.

The last new item is the new anti-flipping rule for residential real estate.  This rule is intended to “reduce speculative demand in the marketplace and help cool excessive price growth.”  The rule is that the principal residence exemption will not be available if a home is sold within 12 months of its purchase.  There are some exceptions, however, any gains achieved through the sale of the home will be 100% taxable as business income.

Given the sizable increase in real estate values over the recent past, and the political pressure towards home affordability, it is not a surprise that these new tools/rules have been passed.  In my opinion, the FHSA and the MHRTC will be welcome and well-used tools in the years to come.

I hope you find this input helpful.  Should you wish to discuss them further with your financial advisor, please do not hesitate to reach out.

Why do we plan?

Knowing where you are translates into knowing where you're going, and we hope to provide every client with the trust and confidence to navigate through the waters of their financial lives.

Learn More