It is that time of the year and being I am both an Accountant and Mortgage Professional I wanted to take this opportunity to share with you the homeowner tax credits you should know about this tax season. With the cost of living crisis so many are currently experiencing it would be a shame to leave money on the table. If any of these apply to you make sure you mention them to your tax accountant to take advantage of the tax savings.
Save money this tax season if you:
- Bought or renovated a home
- Rented out a home
- Worked from home
- Moved
- Are saving to buy a home
- Sold a home
Bought a home
You can claim up to $10,000 (which equals a $1,500 in a refund!) for the purchase of a qualifying home in 2023 under the First Time Home Buyer's Tax Credit if you haven't lived in a home owned by you or your spouse in the previous four years. A qualifying home must be registered in your or your spouse's name in accordance with the applicable land registration system and it must be located in Canada. Simply claim $10,000 on Line 31270 of your tax return.
Note: This Home buyers' tax credit is also applicable for people with disabilities so if either you or your spouse meets the CRA eligibility requirements for a person with disabilities, you may be able to enjoy the Home Buyers' Tax Credit even if you aren't a first-time home buyer.
Renovated: GST on new housing rebate
The GST new housing rebate allows an individual to recover some of the GST paid for a new home from a builder or if you hired a contractor to substantially renovated a house that is for use as your or your relation's primary place of residence. This rebate also applies if you purchased shares in a co-op for the purpose of using a unit in a new or substantially renovated cooperative housing complex or If you purchased a new or substantially renovated mobile home for use as your primary place of residence. For the forms and documents required visit the GST/HST New Housing Rebate page on the CRA website.
Renovated: Home accessibility expenses
If you or an eligible family member incurred expenses in 2023, for improvements to your principal residence or the land necessary for the use and enjoyment of that residence you could save taxes on an eligible renovation costing up to $20,000. A qualifying individual is one who is eligible for the disability tax credit (DTC) or an individual who is 65 years or older. Eligible expenses are expenditures of an enduring nature and must be integral to the home or land that allows the qualifying individual to gain access to, or be mobile or functional within the dwelling. To claim home accessibility expenses, complete the chart using the Federal Worksheet and enter the result on line 31285 of your return.
New for 2023: Multigenerational Home Renovation Tax Credit
Starting January 1, 2023, you may be eligible for up to $7,500 in support for constructing a secondary suite for a family member who is a senior or an adult with a disability. You can claim up to $50,000 in qualifying expenditures for each renovation that is completed. The tax credit is 15% of your costs, up to a maximum of $7,500. Use schedule 12 and claim the amount on line 45355 of your income tax return.
Rental income and expenses
Do you own real estate (including farmland) that you rent out? If so, don't forget to declare your rental income on your taxes. You could claim allowable expenses such as advertising fees, property taxes, insurance, and interest on money you borrowed to purchase or renovate the rental property. The Federal government has proposed new measures to deny expenses to Short Term Rentals which are non-compliant with local regulations however. You could also claim Capital Cost Allowance (CCA) as a deduction on renovations to your rental property as a depreciating asset. Note, though, that while you can claim the renovation costs in the year they're completed, when you sell the property you might end up paying taxes on the value of the CCA claims via capital gains. Because of this, you'll want to exercise care when writing off anything related to renovating your rental property. Fill out form T776.
Work-space-in-the-home expenses
You can deduct expenses you paid in 2023 for the employment use of a work space in your home, as long as The work space is where you mainly (more than 50% of the time) do your work and You use the work space only to earn your employment income. You can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, maintenance, property taxes, and home insurance. However, you cannot deduct mortgage interest or capital cost allowance. You must complete Form T777 and get a completed and signed Form T2200 from your employer.So what about the temporary flat rate method? In 2020 many Canadians were required to work from home due to the pandemic and the temporary flat rate method was introduced to make claiming home office expenses simple and straightforward. The temporary flat rate method no longer applies for the 2023 tax year.
Moving expenses
When you move more than 40 kilometres away to attend school full time, launch a new business, or take a new job, your moving expenses could be tax-deductible. Moving company bills, hotel bills, and legal fees are just a few of the possible eligible moving costs you could claim on line 21900 or your tax return.
There are programs available for those who are looking to purchase a home in the near future.
1. The Home Buyers' Plan (HBP)
If you and/or your spouse are a resident of Canada with qualifying Registered Retirement Savings Plan (RRSP) contributions, one or both of you might be eligible for a tax-free withdrawal toward buying your first home. Under the Home Buyers' Plan (HBP), first-time home buyers or previous homeowners who haven't owned a home in the current year or within the preceding four years can withdraw up to $35,000 tax-free to use toward a down payment on a home. There is one thing to keep in mind: you do have to 'repay' the borrowed amount via RRSP contributions back within 15 years, starting 2 years after the withdrawal and if withdrawals under the Home Buyer's Plan aren't paid back, they'll become taxable.
2. First Home Savings Account (FHSA)
A first home savings account (FHSA) is a registered plan which allows you, if you are a first-time home buyer, to save to buy or build a qualifying first home tax-free. If you opened an FHSA in 2023, you can claim up to $8,000 in FHSA contributions that you made by December 31 as an FHSA deduction on your 2023 tax return.
What if you sold a home? When you sell your home or when you are considered to have sold it, usually you do not have to pay tax on any gain from the sale because of the principal residence exemption. This is the case if the property was solely your principal residence for every year you owned it. If you sold your property and it was your principal residence, you do have to report the sale. The CRA will only allow the principal residence exemption if you report the disposition and designation of your principal residence on your income tax return. If you forget to make this designation in the year of the disposition, it is very important to ask the CRA to amend your income tax return for that year. The CRA will accept a late designation in certain circumstances, but a penalty may apply.
What about Property flipping? Starting January 1, 2023, any gain from the disposition of a housing unit (including a rental property) located in Canada that you owned or held for less than 365 consecutive days before its disposition is deemed to be business income and not a capital gain because it is considered Property Flipping, however there are a number of unexpected life events such as a breakdown in marriage or a death that may exclude the property from being deemed as a flipped property.
At the end of the day when you're offered money in the form of tax credits why wouldn't you accept it? Taking the time to investigate which homeowners' tax credits you qualify for this tax season could help you keep more of your money in your own pocket. Now you just have to figure out what you're going to do with it.