In today's world, conversations about real estate are everywhere. Whether it's the rising cost of purchasing a home, the challenges of finding the right mortgage or discussions on renovating and adapting properties to changing needs, housing is a hot topic.
As Canadians, the reality of a high cost of living and the need to make every hard-earned dollar stretch further is a constant challenge. And this year, as part of Financial Literacy Month, the Canada Revenue Agency (CRA) wants Canadians to be aware of different tax incentives and how they can play a pivotal role in easing the financial weight of homeownership.
The high cost of buying and maintaining a house in Canada is a reality many Canadians face. However, Canadians may be eligible for a range of benefits, credits, and tax incentives administered by the CRA to help make homes more accessible and adapt them to unique needs. These incentives can significantly amplify purchasing power.
But before Canadians can access these housing tax incentives and other benefits and credits, there is a crucial first step – filing an income tax return. Filing an income tax return is the gateway to qualifying for any benefits, credits, or tax incentives related to homeownership.
So, what's new for homeowners in the realm of tax incentives? Here are some new and existing benefits and tax credits to consider:
Multigenerational Home Renovation Tax Credit (MHRTC): This valuable refundable credit covers eligible expenses related to specific qualifying renovations aimed at creating a self-contained secondary unit for an individual to reside with a family member. Homeowners can claim up to $50,000 in expenditures for each qualifying renovation, with the tax credit amounting to 15% of the costs, up to a maximum of $7,500 for each eligible claim.
Home Accessibility Tax Credit (HATC): This non-refundable tax credit is for eligible home renovation or alteration expenses, with an annual expense limit of $20,000.
While all seek to understand more about accessing these tax incentives, it's equally crucial to maintain a fair tax system that ensures access to housing for all. To achieve this goal and create better access for more people, CRA wants Canadians to be aware of certain housing tax obligations.
Here are some of the housing tax obligations Canadians should be aware of:
Principal Residence Exemption: If a house is sold that was solely a principal residence for every year owned, capital gains tax doesn't have to be paid. However, to benefit from this exemption, the sale must be reported and the property designated as a principal residence when filing the personal income tax return for the year the property was sold.
Underused Housing Tax: Canadians should learn about the annual 1% tax on vacant or underused housing and explore the CRA's online self-assessment tool to determine whether exemptions from paying the tax are available.
Residential Property Flipping Rule: Understanding the new rule introduced to ensure that profits from the disposition of flipped properties, including rental properties and assignment sales, are taxed as business income is essential.
Accommodation Sharing: Homeowners earning income through online housing and accommodation platforms such as AirBnB, CanadaStays, FlipKey, and VRBO should be aware of their tax obligations to stay compliant.
Whether you're a first-time buyer, already a homeowner or aspire to become one, the CRA aims to ensure that you have every opportunity to leverage these housing tax incentives to lead the life you desire.