August 3, 2021

Highlights of the 2021 Federal Budget for Real Estate Investors

2020 was an expensive year for many countries worldwide, with the COVID-19 pandemic wreaking havoc across the globe. For most economies, a loss was suffered, and Canada was no exception. Incurring a debt of just over $350 billion, the Canadian government was forced to pivot the 2021 federal budget, but very little was introduced that could actually increase tax revenue. So, what does that mean for real estate investors in 2021?


Still No Capital Gain Tax on Primary Residences

One possible change considered early on was that the Canadian government might impose capital gain taxes on primary residences. This would be different from property tax and would, instead impact any capital profit made in the sale of your primary home.

Essentially, a capital gain tax would mean that, if you were to renovate and improve your home to create a profit upon sale, you would need to pay taxes on that profit, which is not currently in effect. While this would be a reasonably simple way for the government to increase their tax revenue to deflate the deficit, we did not see this introduced in 2021—something real estate investors will, no doubt, be celebrating all year long!

Capital Gain Inclusion Rates Remain Steady

Early on in the year, word was spread that the federal government may attempt to increase the capital gain inclusion rate in an attempt to increase tax revenue, leading to panic amongst the real estate investing community. However, with the announcement of the new 2021 federal budget, no increase was made.

Rumours predicted an increase to 75% or more to the capital gain inclusion rate, but it will remain at 50% for at least this fiscal year. So, for those considering buying a house, renting it out for a few years, then selling it again at a profit, you still only need to pay taxes on half the profited amount. Some are anticipating that this may not last again in the coming year, however, so feel free to reach out to me if this is a real estate investing tactic you’ve been planning to employ!


Home Renovation Loan Offering $40K Interest-Free

For real estate investors planning investment property renovations or adding a legal suite, you may want to take note of this new loan. Offered by Canada Mortgage and Housing Corporation, the home renovation loan offers up $40K on some home retrofits with an authorized EnerGuide energy assessment, including: adding wall/basement insulation, installing high-efficiency water heaters and furnaces, and even replacing drafty windows and doors.


Other 2021 federal budget announcements include expansions to the HST New Housing Rebate eligibility, tax write-offs for used zero-emission vehicles, and luxury taxes. However, I am happy to say that it’s smooth sailing and good news for now for real estate investing!

Have questions about the new budget in relation to real estate investment or predictions for what we might see in 2022? Share your thoughts in the comments below, or contact me today!