Federal Budget 2022 and Your Bottom Line
Hello Everyone,
As many of you probably know, the federal government released their budget for 2022 last week. While perhaps not super exciting for most Canadians, it is at least somewhat interesting to see what types of initiatives affect all of us and the small business community.
Given the macro environment where spending by the government has been at an unprecedented high along with significant inflation that affects all of us, the budget didn’t have much in the way of tax breaks for individuals and small business owners. There were, however, some financial measures that will have an impact, many of which relate to making housing more accessible and affordable to the average Canadian. Some of the more relevant measures include the following:
Housing Initiatives:
One-time $500 payment to those having trouble affording a house. The specifics will be announced at a later date.
A new Housing Accelerator Fund with the goal of incentivizing municipalities to create 100,000 new housing units. I
A rapid housing initiative that will be similar to the above except it will happen more quickly. The goal is 6000 housing units within the next 2-3 years.
The creation of a Tax-Free First Home Savings Account or FHSA that will allow a lifetime contribution of $40,000 (maximum of $8,000 per year). Withdrawals from the FHSA to buy a home would not be taxable.
Those who buy and sell houses within the same year would have to report these as taxable income (not capital gains which are 50% deductible nor can you use the principal residence exemption which is tax free). There are some specific exceptions where the sale of the house is by necessity.
The first time home buyers tax credit will increase from $5,000 to $10,000
Restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non- recreational, residential property in Canada for a period of two years.
Other Measures:
There will be an additional tax of 1.5% for life insurers and banks as well as a one time charge of 15% on profits for 2021 (with certain deductions).
While small business taxes remain the same at 9%, there is reduction in tax rates based on the amount of capital that a business has. This mostly applies to medium sized business.
Provision to expand healthcare to include dental care for Canadians. This will start with under 12-year-olds in 2022, and then expand to under 18-year-olds, seniors, and persons living with a disability in 2023, with full implementation by 2025. It will be restricted to families with an income of less than $90,000 annually.
Travel and relocation expenses deduction for Tradespeople in the construction industry. This measure would allow eligible workers to deduct up to $4,000 in eligible expenses per year.
The federal government will have it’s hands full over the next few years as it combats a huge deficit largely relating to COVID support spending, deals with the housing crisis, climate change and tries to bring inflation under control.
For more details on the various provisions in the budget, I encourage you to read the release from Budget Canada.
If you have specific questions about QBO, accounting or tax, don’t hesitate to send me an email at contact@montrealfinancial.ca and I will attempt to answer it in future newsletters.
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