Tax breaks available to renters, homeowners and first-time buyers

By Andrew Seale | Insight

 

Canada’s red-hot housing market continues to heat up, but that hasn’t stopped the government from offering up a few incentives, too.

“20 years ago none of these (credits and incentives) were there,” says Brian Quinlan, accountant and partner at Campbell Lawless LLP.
Now, the government is offering all sorts of goodies to help Canadians with their living situation – be it renters, first-time home buyers or homeowners.
Yahoo Canada Finance took a look at the different credits and incentives you don’t want to skip over when filing this season’s taxes.
Renters
While there’s no specific federal income tax deduction or tax credit, rent may qualify for provincial tax credits and benefits for lower income individual or families.
“In Ontario, it is part of the Ontario Trillium Benefit (OTB)… cheques are sent out quarterly and amounts received are not taxable,” says Quinlan.
OTB payments are based on the previous year’s income tax return. To figure out if you’re eligible use the provincial government’s calculator.
But it’s not just Ontario says Gerry Vittoratos, a tax specialist at UFile.
“In Manitoba it’s a pure tax credit on your return based on rent you’ve paid as well,” explains Vittoratos. “In Quebec it’s similar to Ontario.”
Moving along

If you moved at least 40 km to take courses as a full-time student at a post-secondary program, you can deduct expenses incurred from transportation and storage costs as well as the cost of cancelling a lease for your old residence and travel expenses like vehicle rentals, meals, accommodation and temporary living expenses.
The moving expenses deduction applies to both first-time home buyers and homeowners who have moved that year, says Vittoratos.
“A lot of people don’t realize if they’re moving for the purposes of the job they can claim moving expenses as well,” he says.
Homeowners get the added bonus of deducting any costs to maintain the old residence (up to a maximum of $5,000) when it was vacant after they moved provided they’ve made a reasonable effort to sell the home during that time.

According to the CRA, this includes “interest; property taxes; insurance premiums; and cost of heating and utilities expenses.”
First-time home buyers

“There are several things that could be applicable to home buyers,” says Vittoratos. “The most obvious one is the home buyers’ amount which is a non-refundable tax credit of $5,000 on the return – but what you’re getting as a tax credit is really 15 per cent of that amount which is $750 dollars.”
The point of the Home Buyer’s Tax Credit (HBTC) is to assist first-time home buyers with the costs associated with the purchase of a home like legal fees, disbursements and land transfer taxes, which can be crushing, especially after saving for a down payment. It’s calculated by multiplying the lowest personal income tax rate for the year – which is 15 per cent – by that $5,000 credit.
“The only catch is you have to meet the CRA definition of a first time home buyer,” says Vittoratos.
In other words, you or your spouse or common-law partner have to have acquired a qualifying home – which is single-family, semi-detached houses, a townhouse, mobile home, condo or apartment – and haven’t “lived in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.”
“It can’t be a cottage – it has to be the principal place of residence,” he adds.
You can also take up to $25,000 out of an RRSP tax free to fund your purchase provided you begin repaying it the second year after the year you take it out.
Generally, you have up to 15 years to repay.
Home office
“Whether you rent or own, if you have your own business you can deduct certain expenses based on only the portion of the home you are using for the business,” says Vittoratos.

But the rules are strict.

To claim a portion of your home as a home office, 51 per cent of the time you’re in that space it must be used for business. After figuring out what percentage of your home’s total square footage that room makes up, you can deduct that percentage of the cost of electricity, heating, maintenance, property taxes and home insurance if you own.

“However you cannot deduct mortgage interest or capital cost allowance,” he says. “But it’s not just limited to business owners, it’s also salaried employees or commission employees who have a home office – a renter can deduct heat and hydro but they can’t claim the rent that they’re paying.”