Summary of the 2022 Federal Budget
Canada released the 2022 federal budget on April 7, 2022. As in past years, the focus of this year’s budget is on building a stronger, more resilient economy leading to long-term fiscal sustainability, and to reduce the federal debt-to-GDP ratio to pre-pandemic levels. The 2022 federal budget also aims to address and fight climate change and protect our environment through investments in and incentives to develop and adopt clean technologies.
You can read more about the 2022 federal budget here.
Top 3 Highlights from the 2022 Federal Budget
There are three categories from the 2022 federal budget that will affect many Canadians including business owners, tradespeople, and those who seek to buy their first homes.
Tax-Free First Home Savings Account
A Tax-Free First Home Savings Account will offer prospective first-time home buyers the ability to save up to $40,000 towards the purchase of their first home. Similar to an RRSP, contributions to this account will be tax-deductible, however, unlike an RRSP, the withdrawals made to purchase a first home – including investment income – will be non-taxable, like a TFSA. This means that the money contributed to a Tax-Free First Home Savings Account provides a tax savings on the way in and is tax free on the way out. The Tax-Free First Home Savings Account is per person, not per household. Learn more about the Tax-Free First Home Savings Account here.
First-Time Home Buyers’ Tax Credit
The First-Time Home Buyers’ Tax Credit amount is being doubled to $10,000, providing up to $1500 in direct support to home buyers. This can be applied to homes purchased on or after January 1, 2022.
Home Accessibility Tax Credit
The Home Accessibility Tax Credit is doubling the qualifying expense limit to $20,000 for 2022 and subsequent tax years. This means a tax credit of up to $3000 for renovations and alterations made for accessibility purposes – an increase from the previous tax credit of up to $1500.
Housing Accelerator Fund
Through a new Housing Accelerator Fund launching in 2022-2023, incentives and support for building more housing will be provided. Canada is investing $4B over five years to double housing construction over the next decade.
Rapid Housing Initiative
The Rapid Housing Initiative is also being extended with an additional investment of $1.5B over two years starting in 2022-2023. This new funding will create over 6000 new affordable housing units.
Multigenerational Home Renovation Tax Credit
A Multigenerational Home Renovation Tax Credit is being introduced that will provide up to $7500 in support for constructing a secondary suite for a senior or an adult with a disability starting in 2023.
Zero-Emission Vehicles Program
The government aims to reduce emissions from transportation by making zero-emission vehicles more affordable for Canadians. The Zero-Emission Vehicles program is being extended to March 2025 with an increased investment of $1.7B over five years to help more Canadians drive zero-emission vehicles.
Businesses will be able to take advantage of a new purchase incentive program providing $547.5M over four years to help businesses upgrade their fleets to zero-emission vehicles.
Funds are also being invested to create a national network of electric vehicle charging stations.
3. Jobs and Growth
Small Business Reduced Federal Tax Rate
Small businesses currently receive a reduced federal tax rate of 9% on their first $500,000 of taxable income, which is 6% lower than the general federal corporate tax rate of 15%. However, once a business reaches a level of capital of $15M, this lower tax rate is no longer available. The 2022 federal budget will phase out access to the small business tax rate more gradually with access being fully phased out when taxable capital reaches $50M instead of the current $15M. This will encourage business owners to grow and create more jobs without losing their small business tax rate. This new measure will apply for taxation years that begin on or after April 7, 2022.
Labour Mobility Deduction
A Labour Mobility Deduction will be introduced and will apply to 2022 and subsequent tax years, offering tax deductions on up to $4000 per year in eligible travel and temporary relocation expenses for eligible tradespersons and apprentices.
Union Training and Innovation Program
Funding for the Union Training and Innovation Program is being doubled through an additional $84.2M over four years. The program helps apprentices from underrepresented groups enter careers in the skilled trades through mentorship, career services, and job matching.
Your Trusted Advisor
KWB strives to keep our clients informed of news that could affect your business and livelihood.
The 2022 federal budget has many implications for Canadians. To understand how you and your business may be affected, we recommend that you speak to your accountant. To inquire about becoming a KWB client, book a consultation here.