“It’s interesting, because the way they designed it, you have to contribute $8,000 annually over a five-year period to get to the $40,000 limit. And if you don’t use your contribution room for one year If you do, it doesn’t carry over to the next year,” Astaneh says. “So to maximize it, one needs to have five years of runway before buying a home.”
Assuming that someone is paying the highest marginal tax rate, Ethan estimates that contributing to a tax-free First Home savings account will save them about $20,000 in taxes. But because they have to set it aside over five years, they also run the risk of paying significantly more than the house they want should the house cost much more.
“The government fulfilled that promise. But the way they delivered it, I think, is really going to limit its use more,” he says.
Another new measure, the Multigenerational Home Renovation Tax Credit, will allow families to claim 15% of up to $50,000 in qualified renovation and construction costs for building a secondary suite for a senior or a disabled adult. This measure will be available for Canadian households starting in 2023.
“It looks like they are encouraging two things. They are encouraging condensation by having multiple generations live in the same unit, which is a very indirect way of increasing the housing supply,” Astanah says. Then it also encourages relative keeping together, which may contribute to long-term care.”