2022 Federal Budget: FHSA Announced, Housing Anti-Flipping, and Dental Benefit

Key takeaways

• The 2022 federal budget announced the First Home Savings Account, effective for 2023
• An anti-flipping rule was introduced: gains from homes sold within 12 months of acquisition would be taxed as business income starting January 1, 2023
• A new Dental Benefit for children under 12 was introduced as a precursor to the broader Canadian Dental Care Plan
• Luxury taxes on vehicles over $100,000, aircraft over $100,000, and boats over $250,000 took effect
• The first home buyer tax credit doubled from $5,000 to $10,000 (credit worth up to $1,500)

The 2022 federal budget was notable for setting up two major policy shifts — the First Home Savings Account and the anti-flipping rule — that took effect in 2023. The budget also began the government's move into dental care and introduced new luxury taxes.

First Home Savings Account announcement

Budget 2022 announced the FHSA as a new registered account available from 2023 with $8,000 annual room, $40,000 lifetime maximum, deductible contributions, and tax-free qualifying withdrawals. The combination of RRSP deductibility and TFSA-style tax-free withdrawal made the FHSA the most powerful savings vehicle announced in years for first-time buyers.

Anti-flipping rule

Effective January 1, 2023, gains from the sale of a residential property (including a rental property or vacation property) held for less than 12 months are automatically treated as business income — not a capital gain — and therefore fully taxable without the 50% inclusion rate or the principal residence exemption. Life-event exceptions apply. The 2023 effective date gave taxpayers one year to complete transactions they had already started.

Luxury tax

The Select Luxury Items Tax applies at the lesser of 20% of the amount above the threshold, or 10% of the total consideration paid. For cars and aircraft over $100,000 and boats over $250,000, this effectively adds about 10% to the price of qualifying luxury items. The tax applies to the sale price and is collected by the vendor, not the purchaser. Customs duties and other taxes are excluded from the threshold calculation.