With the rising prices of food, shelter, and other products and services, Canadians’ expectations of the federal government’s 2022 Budget were about as high as accelerating inflation and interest rates.
According to the findings of a report about the effect higher costs of living may have on Canadians, for those who are struggling to keep their bank accounts in the black the combination of rising inflation and increased interest rates may cause financial hardship.
Budget 2022 acknowledges that Canadians are struggling with increased costs of living, including the ability to afford a home, but there was little in the Budget to combat rising inflation rates—the highest the country’s seen in nearly 30 years—and as a result, Canadian’s can expect to endure further interest rate hikes from the Bank of Canada.
Budget 2022 proposes several measures designed to help stabilize the housing market, address housing supply, and make it easier to save for and invest in housing. These measures include:
- a new Tax-Free First Home Savings Account (FHSA) to help first-time homebuyers save for a home
- increase the Home Buyers’ Tax Credit (HBTC) amount from $5,000 to $10,000 which, at a rate of 15 per cent, increases the credit from $750 to $1,500
- a new Multigenerational Home Renovation Tax Credit, applicable to eligible expenses incurred to create a secondary dwelling unit to allow a senior or a person over the age of 17 with a disability (eligible person) to live with a relative
- double the Home Accessibility Tax Credit from $10,000 to $20,000 which, at a rate of 15 per cent, provides up to $3,000 in tax relief
- an extension of the First-Time Home Buyer Incentive, which acts as a shared-equity mortgage with the federal government, to March 31, 2025
- a new Housing Accelerator Fund to help municipalities and communities create more affordable housing, with a target of 100,000 new units over the next five years
Dental care and pharmacare
Prime Minister Justin Trudeau’s confidence-and-supply agreement with the NDP proposed new spending commitments, including national dental and medical expense measures. These include:
- providing a national dental care plan for families with less than $90,000 annual household income
- an extension of the Medical Expense Tax Credit to certain expenses incurred by individuals seeking to become parents through assisted reproductive technologies, such as surrogacy
Changes to taxes on beer and vapes
Budget 2022 proposes many pocketbook initiatives, including eliminating the ‘sin’ tax on low-alcohol beer and adding one to vaping products.
- an excise duty is set to end on low-alcohol beer, which is any such beverage with no more than 0.5 per cent alcohol by volume
- implement a previously announced excise duty on vape products, tacking $1 per two mL of vape fluid for any container with less than 10 mL of liquid
In addition to these measures, the federal government indicated it will examine a new minimum tax regime and will release details on a proposed approach in the 2022 fall economic and fiscal update.
For a deeper dive into the tax measures proposed read Grant Thornton LLP’s full Budget 2022 summary.
How will Budget 2022 affect your wallet?
Though addressing housing affordability and introducing a host of new tax exemptions and credits were included in Budget 2022, it did little to address the cost of living crunch Canadians are facing with rapidly increasing inflation and interest rates. With the price of basic amenities such as food, power, shelter, and gas going up, the average Canadian’s salary and savings will decrease in value. For Canadians who are already feeling the financial squeeze, the jolt of rising costs of living may cause financial stress.
Additionally, as Canada continues along the road to post-pandemic recovery, many of the temporary financial relief programs for individuals have been discontinued. Canadians who have depended on them over the last two years may find it hard to make ends meet.
If you are experiencing financial hardship, there are solutions available. A discussion with a Licensed Insolvency Trustee is free of charge and can provide you with insight on how to take back control of your finances.