When you buy a home, you're probably thinking more about location, the number of bedrooms, and interior decoration than taxes. But one of the benefits of being a homeowner in Canada is that you can save a substantial amount on your taxes. This is a great incentive to offset the home buying costs.
If your new home is the first you've owned, you can now claim a first-time home buyer's tax credit. Both you and your spouse (or common-law partner) can claim this first-time homebuyer's tax credit. In order to qualify, neither you nor your spouse can have owned a home in the past five years.
The amount of the credit is calculated by multiplying the lowest personal income tax rate for the current year by 5,000. For example, since this rate was 15% in 2016, the maximum amount you could have saved that year was $750.
Capital Gains Tax
Unlike in the United States, you can sell your home in Canada and make a profit without being liable for any capital gain taxes. Indeed, the Canada Revenue Agency allows all profits from a home sale to be completely tax-free.
In order to qualify, however, you must have first designated the home as your primary residence. Normally, you must also live in your primary residence, but there is the possibility to designate a "recreational" property as your principal residence, for tax purposes.
New Housing Rebate
If your new home is valued at less than $450,000 and is also your declared principal residence, you may be eligible for a GST/HST housing rebate. While some provinces also provide an additional rebate, Alberta does not.
In order to qualify for this rebate, you must either:
- Have purchased a new home or a substantially renovated home;
- Have purchased shares in a co-op; or
- Have built or substantially renovated your own home.
If you've made renovations or adjustments to your home to enable it to be more accessible for senior citizens and individuals with mobility issues, you may be able to qualify for up to $10,000 in tax exemptions with the home accessibility tax credit.
Individuals with mobility issues can claim the expenses of renovating their home to make it more accessible. These adjustments can be claimed as medical expenses.
These can include installing:
- Air filters and purifiers.
- Lifts or power transportation devices.
- Outdoor or indoor ramps.
- Lowering bathroom and kitchen cabinets.
- Enlarging doors and hallways.
Withdrawals From Your RRSP
In order to buy or build a home, you can withdraw up to $25,000 in a single year from your registered retirement savings plan (RRSP) completely tax-free.
Known as the Home Buyers' Plan, this program is only for people buying or building their first home. Alternatively, the funds can go towards buying or building a home for a family member who has a disability. The funds are withdrawn tax-free, and you have up to 15 years to repay the money.
If you have a rental property, there are eligible rental expenses you can claim on your taxes. Allowable expenses for renting all or part of your property can include insurance, interest payments on money you've borrowed to buy (or renovate) the property, and advertising.
You may be able to claim your moving expenses on your taxes if you're moving to a new home that's at least 40 kilometres closer to where you work or study. Eligible expenses that you can claim include:
- Storage costs.
- Transportation costs (including packing materials).
- Travel expenses, including lodging.
- Temporary living expenses for up to 15 days.
- Costs related to updating your documents.
- Costs related to maintaining your former home.
- Utility hook-up and disconnection costs.
Working From Home
If you're using your home as a place of business, you may be able to claim a number of your housing expenses on your taxes. In order to do so, you must be deemed self-employed by the Canada Revenue Agency.
Some of the expenses you may be able to claim include:
- Property taxes.
- Interest on your mortgage.
- Home insurance.
- Repairs and maintenance to the home.
- Utility bills.
In order to qualify, you must demonstrate that your business had a reasonable expectation of making a profit.
Depending on which renovations you make and where you live, you can receive rebates for upgrades such as:
- Improving insulation - Up to $3,250.
- Removing drafts - Up to $500.
- Adding ventilation fans - Up to $50.
- Installing a gas fireplace - $300.
- Upgrading appliances - Up to $50 (per appliance).
- Adding a ductless heat pump - $800.
- Replacing doors and windows - Up to $500.
- Performing three or more upgrades - $750.
You can refer to Natural Resources Canada for a list of all current rebate programs in Alberta.
As you can see, there are more benefits to being a homeowner in Canada than just having a beautiful home. Be sure to check your eligibility for tax credits. As always, consult a tax professional before filing your taxes.