2023 Federal Budget: FHSA Launches, Grocery Rebate, and Dental Care

Key takeaways

• The First Home Savings Account (FHSA) launched in 2023 — $8,000 annual room, $40,000 lifetime maximum
• A one-time grocery rebate of up to $467 per family was distributed as an enhanced GST/HST credit
• The Canadian Dental Care Plan for uninsured Canadians under 18, over 65, or with disabilities began rolling out
• The Alternative Minimum Tax (AMT) exemption increased and the rate rose from 15% to 20.5%
• The clean technology investment tax credit introduced at 30% for solar, wind, storage, and heat pumps

The 2023 federal budget was notable for launching the First Home Savings Account — the first new registered savings plan in years — and for beginning the federal government's move into dental care. For individual taxpayers, the AMT changes and clean technology credits were the most significant structural changes.

First Home Savings Account (FHSA)

The FHSA allows first-time homebuyers to contribute up to $8,000 per year (lifetime maximum $40,000) and deduct contributions from income, similar to an RRSP. Qualifying withdrawals to buy a first home are tax-free, similar to a TFSA. Income earned inside the FHSA grows tax-free. Unused contribution room carries forward up to one year.

Accounts became available through financial institutions on April 1, 2023. The FHSA can be combined with the RRSP Home Buyers' Plan — a significant advantage for first-time buyers with significant RRSP savings.

Alternative Minimum Tax changes

The AMT exemption increased from $40,000 to $173,205, protecting most middle-income Canadians from AMT exposure. The AMT rate rose from 15% to 20.5%. High-income taxpayers claiming large capital gains deductions, charitable donation credits, or other preferential items may now face a higher AMT liability.

Clean technology investment tax credit

A 30% refundable investment tax credit applies to qualifying clean technology investments — solar panels, small modular reactors, wind turbines, storage systems, and heat pumps. Businesses that invest in eligible equipment can reduce their tax payable by 30% of the capital cost, with excess credits refunded. Labour requirements attached to the credit increase to 35% by 2025.