Owning a home has its perks. There’s emotional security, a good credit score and no hassles with the landlord. However, it also comes with responsibilities, like paying your mortgage, utility bills, home insurance premiums, property taxes, and maintenance costs.
While homeownership is expensive, there are tax credits and rebates available to Canadian homeowners. In this post, we’ll discuss when and how Canadian property holders can claim tax credits and reduce their tax burden.
7 Homeowner Tax Credits You Can Benefit From
Though tax filing is worrisome, homeowners can breathe a sigh of relief knowing that they’re eligible for certain tax credits and rebates. Check out these credits and rebates to see which apply to you.
First-Time Home Buyers’ Tax Credit (HBTC)
Have you bought your first home in the past year or haven’t resided in a home owned by you or your spouse in the last four? Then you can take advantage of this non-refundable tax credit (to a maximum claimable amount of $5,000). It was introduced to help Canadians buy their home and meet the overwhelming closing costs associated with homeownership, such as home surveys, land transfer taxes and legal expenses. However, you need to claim your credit within one year from the date of purchase. Your property also needs to meet the following criteria.
Your property should be:
- an existing or new house.
- located in Canada.
- registered in your name (or your spouse’s).
- resided in by you within one year of purchase.
- a single, semi-detached, townhouse, condominium, mobile home or apartment.
- (may) have a share in a co-operative housing program.
Owners also need to meet these criteria:
- You or your spouse cannot have bought a home in the last four years
- You cannot have resided in your spouse’s home in the last four years
Home Accessibility Tax Credit (HATC)
This tax credit lets seniors (65 and older) and those with mobility issues to claim up to $10,000 for home renovations to improve their home’s accessibility and safety. This non-refundable tax credit is applicable to any expense associated with home renovation, including materials.
You must meet any of the following conditions:
- You’re 65 years or older;
- You have an authentic disability tax certificate;
- You support a qualifying candidate.
Yes, you may qualify for this credit if you support someone legally entitled to it, you spend $5,000 to make the home wheelchair accessible for a senior member in your family.
Credits for Energy Efficiency
There are various federal and provincial tax credits available to make energy saving upgrades to your home. However, this depends on the province in which you live and the kind of upgrades you’re making. This credit has been introduced to encourage homeowners to save energy, improve insulation, reduce waste, and preserve the planet. You can also get rebates on products and appliances with the ENERGY STAR rating.
To apply for this credit, your home needs an EnerGuide energy efficiency evaluation from a certified energy advisor. This energy evaluation costs approximately $400 but can help you receive a rebate of $10,000 or more. While making homes energy efficient is often expensive (what with new insulated windows, LED lights and smart appliances), the upgrades will potentially save you a lot on your energy bills.
Medical Expenses Tax Credit
Similar to the HATC, you can claim the medical expenses tax credit to make your home more accessible for anyone in your family with mobility issues. If you qualify, your tax credit amount would be 25% of eligible medical expenses, up to a fixed amount set annually. This is decreased by 5% of you and your spouse/partner’s income in excess of $26,277 per family unit. The Canadian government lists all such medical expenses eligible for this tax credit on their website.
GST/HST New Housing Rebate
When you buy a newly-constructed house, you need to pay GST or HST on its acquisition price, just as you would for any other product you buy. While this definitely adds to your overall expenses, the good news is that you may get most of that extra money back when filing your taxes.
However, in order to be eligible for the GST/HST new housing rebate, your home should be your principal residence and worth less than $450,000. Residents of Ontario and British Columbia can claim the provincial portion of HST if they buy, construct, or undertake major home improvements (for better accessibility) on their residential property.
Tax Credits on Rental Suites
If you rent out a portion of your primary residence, you can claim certain expenses when filing your tax return. These ‘reasonable’ expenses include mortgage premiums, utility bills, property advertising costs, property tax, home insurance, and repair and maintenance. Typically, the claimable amount on rental expenditures is based on the square footage of their rental suite versus the rest of their home. You can make credit claims on your rental expenses by using tax form T776.
Tax Credits for People Who Work From Home
You may be eligible for homeowner tax credits if you work from home or run a home-based business. The deductible is typically estimated based on the percentage of square footage used for work, together with costs for electricity, work supplies, insurance, property tax, security and maintenance.
You cannot deduct mortgage insurance or capital cost allowances. These are considered business expenses and, if deducted, cannot be used for procuring a principal residence exemption later when selling your home. In order to claim this credit, there must be a dedicated workspace in your home and it should be used at least 50% of the time for conducting productive work.
The best thing about this credit is that it applies to both people with home-based businesses and to employees working from home. If you are a work-from-home employee, you need to ask your employer to fill out and sign a T2200. Although you won’t have to submit it with your annual tax package, you must have it on file in case the Canada Revenue Agency wants to review your expenses.
While filing taxes can be hectic and stressful, it’s also an opportunity to find and maximize eligible tax credits. Considering all the potential tax breaks for homeowners, it’s worth speaking to your tax advisor or accountant to discuss your eligibility for one or more. You may be surprised at the money you save.