Your home may represent a major portion of your investment portfolio, so the Canada Revenue Agency provides a number of ways you can use your home or the purchase of one to reduce tax and manage investment growth.
You also may have provincial credits available, depending on where you live.
Home Buyer’s Tax Credit
“The home buyer’s tax credit is a tax credit available to first-time home buyers, or any time if you qualify for the disability amount on your tax return.
You can claim $5,000 if your new home qualifies, resulting in a non-refundable tax credit,” says Fred Rovers, certified financial planner and regional leader with Edward Jones in London, Ontario.
The HBTC is claimed by entering $5,000 on line 369 of your tax return.
This amount can be divided between spouses or between other people jointly purchasing the home, but the total amount claimed for the purchase cannot exceed $5,000.
GST/HST New Housing Rebate
New house purchases under $450,000 may qualify for a rebate of the GST or the federal portion of the HST. A qualifying house is one that is previously unoccupied or substantially renovated and purchased as a primary residence.
Homes in British Columbia, Nova Scotia and Ontario also qualify for provincial rebate programs. Form GST190 serves as your application, and form RC7190-WS is the worksheet you complete to calculate the rebate amount.
There also is a provincial form for the three provinces with rebate programs. This rebate is not attached to income tax returns, and it is usually filed at the time you take occupancy in the house.
Certain renovation expenses incurred to adapt a home for a disabled person may qualify as a valid medical expense and would therefore be eligible for claim on your tax return.
To qualify, such renovations would not be expected to increase the value of the dwelling, nor would they be improvements normally made when no disability is involved.
These expenses may include, but are not limited to, ramps or stair modifications, changes to doorways or halls to accommodate assistive devices or lowering of countertops for accessibility.
Medical expenses are calculated at line 331 and claimed on line 330.
Home Buyer’s Plan
The home buyer’s plan allows you to borrow, interest-free, from your own registered retirement savings plan to buy or build a home for yourself or a disabled relative. You can borrow up to $25,000 a year, however, you do have to meet repayment requirements within 15 years.
If you do not make a payment for a given year, the CRA considers this a withdrawal from your RRSP and taxes that income accordingly.
Self-employed taxpayers as well as people who are required by their employers to pay certain expenses to earn wages may be able to claim home office expenses.
Those who are self-employed can deduct expenses if the home office is their principal place of business, or if there is a space only used for earning income and it is used regularly to meet clients.
An amount of housing expenses equal to the percentage of space devoted to work can be deducted from business expenses.
Employees can deduct similar costs, but the range of eligible expenses is more limited. Home day care operators may also qualify for business expense deductions.
If you establish a new home to be closer to a new job or to attend a post-secondary institution full time, you may qualify for moving expenses if your new residence at least 40 kilometres from your old residence.
Movers, truck rentals and traveling costs to your new location usually qualify.
Costs associated with selling a house, such as real estate agent’s and lawyer’s fees may be included, as are costs related to the purchase of your new home. Moving expenses are claimed on line 219 on your tax return.
References & Resources
- Fred Rovers, CFP, Financial Advisor, Regional Leader; Edward Jones, London, Ontario
- Canada Revenue Agency: Line 369 — Home Buyer’s Amount
- Canada Revenue Agency: GST/HST New Housing Rebate
- Canada Revenue Agency: Line 330 — Medical Expenses
- Canada Revenue Agency: Home Buyer’s Plan (HBP)
- Canada Revenue Agency: Line 219 — Moving Expenses