If you’re finding it tough to buy a home these days, you’re not alone. In recognition of this, the 2024 federal budget strives to make homeownership more achievable through several key measures.
1. RRSP Home Buyers’ Plan Increased To $60,000
The Home Buyers’ Plan (HBP) limit is about to get a significant boost, increasing from $35,000 to $60,000. This federal program allows Canadians to withdraw from their RRSP to buy or build a qualifying home. With the new limit, you can now leverage an extra $25,000 from your RRSP for your down payment. This change recognizes the growing challenges of saving for a down payment in today’s market.
But that’s just the beginning! The enhanced HBP will work perfectly with the government’s Tax-Free First Home Savings Account (FHSA).
How Will The FHSA Work With The HBP?
The FHSA is a brilliant tool that allows Canadians to contribute up to $8,000 per year, with a lifetime cap of $40,000, towards their first home. Since its launch just a year ago, it’s already a hit—over 750,000 Canadians have opened accounts, according to the Deputy Prime Minister.
Combining the enhanced HBP and the FHSA makes saving for a downpayment much more attainable. These programs offer substantial tax benefits and increased savings potential, bringing the dream of homeownership closer than ever.
So, what should you do next? Start by maximizing your RRSP contributions to take full advantage of the new HBP limit. Also, if you haven’t already, open an FHSA and make regular contributions to enjoy tax-free growth. With these two powerful tools in your financial strategy, you’ll be well on your way to securing that first home.
2. RRSP Home Buyers’ Plan Repayment Period Extended
If you’ve tapped into the Home Buyers’ Plan (HBP) between January 1, 2022, and December 31, 2025, you’ll now get an extended repayment grace period of three years. This means you’ll have up to five years before you need to start repaying what you borrowed from your RRSP.
Why is this a big deal? Well, buying your first home is exciting, but it can also be financially overwhelming. By extending the grace period, the government is giving you more time to settle into your new home and focus on those all-important mortgage payments without the immediate pressure of repaying your HBP withdrawal.
How Does The New HBP Repayment Period Extension Work?
Under the current rules, you must start repaying your HBP withdrawal two years after you take the money out. With this new proposal, you’ll get an extra three years, giving you a total of five years before repayments kick in. This extra time can be a game-changer, allowing you to manage your finances more comfortably and reduce stress as you get accustomed to homeownership.
Will These New Measures Help Make Homeownership More Accessible?
This initiative is part of a broader effort to make homeownership more accessible and manageable for Canadians. It complements other measures like the increased Home Buyers’ Plan limit and the Tax-Free First Home Savings Account (FHSA), both designed to help you save and manage the costs of buying a home.
So, if you’re a first-time home buyer who’s used the HBP recently or plans to soon, this extended grace period is something to celebrate. It’s all about giving you the breathing room you need to get ahead and make your new house truly feel like home.
3. 30-Year Amortization For First-Time Home Buyers Purchasing Pre-Construction
Great news for young Canadians dreaming of their first home! In Budget 2024, the government is rolling out a game-changer: starting August 1, 2024, first-time home buyers purchasing newly built homes can now opt for 30-year mortgage amortizations. This means you’ll have an extra five years compared to the previous 25-year limit, making those monthly mortgage payments more manageable.
How Will 30-Year Amortization Periods Help Canadians?
So why is this such a big deal? By extending the amortization period, the government is not only making it easier for younger Canadians to afford their first home but also giving a boost to the housing market by encouraging new builds. This move is all about making homeownership more accessible while also addressing the need for more housing supply.
If you’re a first-time buyer looking at a newly built home, you can now spread your mortgage payments over 30 years instead of 25. This extension reduces your monthly payments, giving you more breathing room in your budget. It’s a smart move that acknowledges the financial hurdles many young Canadians face when trying to enter the housing market.
4. Increasing Capital Gains On Cottages And Rental Properties
Big changes are coming in Budget 2024, aimed at making Canada’s tax system fairer. The government is increasing taxes on capital gains for the wealthiest 0.13 percent of Canadians. Here’s what you need to know:
If you’re an individual raking in more than $250,000 in capital gains in a year, your inclusion rate—the portion of capital gains on which tax is paid—will jump from one-half to two-thirds. This means you’ll now pay taxes on two-thirds of your capital gains above that threshold, instead of the previous 50 percent. For gains under $250,000, the rate remains unchanged, so you’ll continue to pay tax on just 50 percent.
But that’s not all. The same increase in the inclusion rate to two-thirds will apply to all capital gains realized by corporations and trusts. This change ensures that higher earners and larger entities contribute a fairer share of taxes.
These new rules kick in for any capital gains realized on or after June 25, 2024. So, if you’re affected, it’s time to start planning accordingly.
Capital Gains Tax Increase Overview
| Individuals with over $250,000 in capital gains | Inclusion rate increases from 50% to 66.67%. |
| Corporations and trusts | Inclusion rate also jumps to 66.67%. |
| Effective date | Applies to gains realized on or after June 25, 2024. |
How Will This Initiative Help Canadians?
This move is part of a broader effort to level the playing field and ensure that Canada’s wealthiest pay their fair share. By targeting those with significant capital gains, the government aims to create a more equitable tax system without burdening the average taxpayer.
Bottom Line
Budget 2024 is all about fairness and equity, ensuring that those with the most contribute more to the public purse. If you fall into these categories, it’s a good idea to consult with a tax professional to understand how these changes might affect you and to plan your financial strategy moving forward.
