Mar. 31, 2009 - Budget-Time in Ontario

How will the latest Federal and Provincial Budget's impact you as a homebuyer or homeseller?The information below has  gathered from various web sites.

Property Tax Relief

The government is proposing to increase the amount of ongoing sales tax and property tax relief for individuals and families with low to middle incomes by more than $1 billion a year. To better target this tax relief, the current combined sales and property tax credits would be replaced with two new tax credits: the Ontario Sales Tax Credit and the Ontario Property Tax Credit. These changes would improve transparency, fairness and timeliness.

Ontario Property Tax Credit

Property tax relief, currently provided through the Ontario Property and Sales Tax Credits, would be replaced by a new refundable Ontario Property Tax Credit for low- to middle-income homeowners and tenants that would provide an additional $270 million in property tax relief on an annual basis. The new credit would maintain existing benefit amounts while extending property tax relief to more Ontarians.

The credit would be based on occupancy cost — that is, property tax paid or 20 per cent of rent paid. A credit would be provided for occupancy cost of up to $250 for non-seniors or $625 for seniors, plus 10 per cent of occupancy cost. The credit would not exceed occupancy cost and would be subject to a maximum of $900 for non-seniors and $1,025 for seniors. It would then be reduced by two per cent of adjusted family net income in excess of $20,000 for single individuals and $25,000 for families.

For example, for the 2010 taxation year, a single individual with income of $20,000 or less and $500 in monthly rent would receive $370 in Ontario Property Tax Credit; a couple with $1,500 in property tax and $25,000 or less of family income would receive $400; and a senior couple with $4,000 in property tax and $25,000 or less in family income would receive $1,025.

The amounts and thresholds would be indexed for inflation to protect the value of this assistance for people with low to middle incomes.

About 2.3 million families and individuals would benefit from this measure.

Eligible senior homeowners will continue to receive additional assistance with their property taxes through the Ontario Senior Homeowners’ Property Tax Grant.

First-Time Home Buyers’ Tax Credit Explained

By Brian Madigan LL.B.

The federal government has introduced a tax credit in its budget for first time home buyers:

“Budget 2009 proposes to introduce a new non-refundable tax credit based on an amount of $5,000 for first-time home buyers who acquire a qualifying home after January 27, 2009 (i.e. the closing is after that date). The credit for a taxation year will be calculated by reference to the lowest personal income tax rate for the year and is claimable for the taxation year in which the home is acquired.

An individual will be considered a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the calendar year of the home purchase or in any of the four preceding calendar years. A qualifying home is one that is currently eligible for the Home Buyers’ Plan that the individual or individual’s spouse or common-law partner intends to occupy as the principal place of residence not later than one year after its acquisition.

Budget 2009 also proposes that the credit be available for certain acquisitions of a home by or for the benefit of an individual who is eligible for the disability tax credit (DTC). In particular, the credit will be available in respect of a home acquired after January 27, 2009 (i.e. the closing is after that date) by an individual who is eligible for the DTC, or by an individual for the benefit of a related individual who is DTC-eligible, if the home is acquired to enable the DTC-eligible individual to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.

For the purpose of this credit, a “DTC–eligible” individual is an individual in respect of whom an amount is deductible under the DTC for the taxation year in which the agreement to acquire the home is entered into, or would be deductible if costs for an attendant or care in a nursing home were not claimed for Medical Expense Tax Credit purposes by or on behalf of that person. Where the home is acquired by or for the benefit of a DTC-eligible individual, the home must be intended to be the principal place of residence of that individual no later than one year after its acquisition.

The credit may be claimed by the individual who acquires the home or by that individual’s spouse or common-law partner. For the purpose of this credit, a home is considered to be acquired by an individual only if the individual’s interest in the home is registered in accordance with the applicable land registration system.

Any unused portion of an individual’s First-Time Home Buyers’ Tax Credit may be claimed by the individual’s spouse or common-law partner. Where more than one individual is entitled to the First-Time Home Buyers’ Tax Credit (for example, where two individuals jointly buy a home), the total amount of the credits claimable for the year by those individuals shall not exceed the maximum amount of the credit that would be claimable for the year by any one of those individuals.”

It is not a grant, but rather a tax credit. It has greater impact for those with lower levels of income. The credit is rather small, and its receipt is delayed until the filing of the income tax return for the appropriate taxation year. Hopefully, it will operate as a stimulus to the real estate industry.

More Takes on the Federal & the Provincial Budget.

The Federal Budget 2009 recognizes economic importance of housing to stimulate the economy introduces several incentives to get Canadians spending by buying a first time home, or renovating the one they are already in. New Canada's Economic Action Plan includes:

1. Home Buyers’ Plan Withdrawal Limit Increase
2. First-Time Home Buyers’ Tax Credit
3. ecoENERGY Retrofit Homes Grant
4. The Home Renovation Tax Credit

RRSP Home Buyers Plan (HBP) changed

The changes to the RRSP Home Buyers Plan introduced in the new budget are not only good for potential home buyers, they are also seen as a victory for OREA and CREA. “It’s gratifying to see that our lobbying efforts at the national level for enhancements to this program have paid off,” says OREA President, Gerry Weir.

The 2009 budget increases the withdrawal limit for the RRSP Home Buyers Plan to $25,000 from $20,000 providing first-time home buyers with additional access to savings to purchase or build a home.

The eligibility and repayment rules remain pretty much the same. The money withdrawn from the RRSP must be repaid over a period of no more than 15 years to retain its tax deferred status. The repayment period starts the second year following the year the first withdrawals were made. If a participant pays less than the scheduled annual payments, the amount that they don’t repay must be reported as income on their tax return for that year.

For example, in October 2009 a first time buyer withdraws $24,000 from his or her RRSP to finance the purchase of a home. Their first annual repayment of $1,600 ($24,000 divided by 15 years) is due by December 31, 2011.

First-time Home Buyers Get a Non-refundable Tax Credit

For 2009 and subsequent years, the budget also introduced a new non-refundable tax credit to help first-time home buyers with some of their closing costs. This Home Buyer Tax Credit (HBTC) will provide up to $750 in tax relief on the purchase of a first home. The HBTC is calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5,000. For 2009, the credit will be $750.

To qualify for the HBTC, an individual must purchase a qualifying home and neither the homebuyer or the homebuyer’s spouse or common-law partner can have owned and lived in another home in the year of purchase or any of the four preceding years.

A qualifying home is a housing unit located in Canada including existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings, all qualify. A share in a co-operative housing corporation that entitles the individual to possess and gives an equity interest in a housing unit also qualifies. However, a share that only provides a right to tenancy in the housing unit does not qualify.

ecoENERGY Retrofit Grants for Eco-friendly Upgrades

The ecoENERGY Retrofit program provides home and property owners with grants of up to $5,000 to offset the costs of making energy-efficiency improvements. Grants apply to a variety of measures that reduce energy consumption – anything from increasing insulation to upgrading a furnace. Building on the success of the existing program, Budget 2009 provides an additional $300 million over two years to the ecoENERGY Retrofit program to support an estimated 200,000 additional home retrofits.

Home Renovation Tax Credit

Home Renovation Tax Credit (HRTC) will provide a temporary 15 per cent income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010. The credit may be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, and will provide up to $1,350 in tax relief.

What’s eligible and what’s not for the HRTC?

The federal government hopes the Home Renovation Tax Credit will get Canadians spending now to help create jobs in industries typically hurt by an economic downturn. Now through January 31, 2010, homeowners can claim a tax credit for 15 per cent of renovation expenses between $1,000 and $10,000. Here’s a sample of what qualifies under the program and what does not.

Eligible:

• Renovating a kitchen, bathroom or basement
• New carpet or hardwood floors
• Building an addition, garage, deck, garden/storage shed, fence
• Re-shingling a roof
• Swimming Pools (inground and permanently installed above-ground pools)
• A new furnace, woodstove, boiler, fireplace, water softener or water heater
• A new driveway or resurfacing a driveway
• Painting of interior or exterior of a house
• Window coverings directly attached to the window frame and whose removal would alter the nature of the dwelling
• Laying new sod
• Fixtures – lights, fans, etc.
• Associated costs such as permits, professional services, equipment rentals and incidental expenses.

Ineligible:

• Furniture, appliances, and audio and visual electronics
• Inflatable pools
• Purchasing of tools
• Cleaning carpets
• House cleaning
• Maintenance contracts (e.g. furnace cleaning, snow removal, lawn care, and pool cleaning)
• Financing costs

Ontario Real Estate Association (OREA) Commentary

“At first blush, the incentives related to housing seem very positive,” says 2008 OREA President, Gerry Weir. “However, we shouldn’t expect to see these programs stimulate the economy immediately like people hope they will. We are probably looking at two to three years before we see the benefits.”

As for the 2009 budget in general, Weir says the billions of dollars the government plans to spend on municipal infrastructure will likely do volumes to create jobs and boost the economy. “We are grateful that the government recognizes that the housing industry moves the economy, but we must have consumer confidence. Job creation and low interest rates will help people – especially first time buyers – feel secure about buying a home,” says Weir. “Then we will also see people spending more on renovations.”