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Tax season is approaching, and while we don't usually talk much about taxes with our clients, it is an excellent time to learn about the tax implications of being a homeowner. For the most part, being a homeowner is good for your taxes. There are no tax penalties for purchasing or owning a home. Instead, there are several benefits and credits you can potentially use to help offset the cost of buying, renovating or moving. 

As a reminder, we are mortgage professionals, not tax preparation specialists. This article only covers the basics of what current and prospective homeowners should know before filing their taxes. 

Credit for First Time Buyers

If you are a first-time buyer or have not owned a home for the past four years or more, you may qualify to claim the Home Buyer's Amount on your next tax return. It allows you to claim up to $5000 of the purchase of certain types of homes, including condominiums, single-family homes, semi-detached, and townhouses. You, your partner, or both can claim the Home Buyer's Amount. As long as the total of both claims does not exceed $5000, and both are registered as owners.     

Recovering HST (or GST)

Virtually everything we buy is subject to GST, or HST in Ontario and some other provinces, including newly built or extensively renovated homes. The HST can add up to a significant cost, making purchasing a home even more difficult. However, the federal government offers a GST/HST New Housing Rebate on the purchase of new homes to help recover some of the additional cost. The home must be your primary place of residence, among other eligibility criteria, depending on the type of building and whether it is a new build or a major renovation. 

Accessibility Renovation Expenses

Expenses incurred in renovating a home to improve the accessibility for a senior or disabled person can add up quickly. The Home Accessibility Tax Credit (HATC) allows for a claim of up to $10,000 when the renovation is made for someone over 65 or for a disabled person of any age. A tax reduction of 15% of the claimed amount is allowed by this non-refundable tax credit. 

Work From Home Expenses

Home office expenses have always been eligible for small business owners and self-employed contract workers. However, with many businesses making remote work for employees a permanent arrangement, people are facing additional home office costs. As a result, temporary measures have been put in place to allow employees to claim certain work from home expenses until the 2022 tax year. You can choose to claim actual expense amounts or use a temporary flat rate method to determine your eligible deduction.  

Moving Expenses

Relocating for a new employer or to start a new business can come with some hefty costs, including moving costs, closing costs, real estate fees, legal fees and land transfer taxes. If your new home is at least 40 km closer to your new place of employment than the home you left, you may be able to claim some of the moving expenses to offset income tax. Moving to a full-time residence for school also applies. Moving expenses can even be carried forward to future tax years if you don't need to use it all in one year. 

Mortgage Interest isn't Always Eligible

Many people believe that you can deduct mortgage interest as an expense to reduce your income tax. You can, but only if you rent part of your home to another individual or family. In that case, part of your mortgage interest offsets the rental income you collect. However, for the average homeowner in Canada, mortgage interest is not an eligible expense. 

While owning a home isn't going to save you a ton in income tax, the programs we have discussed above offer some reductions to help offset the costs of purchasing and maintaining a home. Be sure to consult a tax professional to answer any questions about these credits and benefits. Your accountant or tax preparer will have the answers and help you understand which ones are available to you. 

Ask a mortgage broker if you are thinking about moving or getting into the housing market - now or after tax season. We work with you to understand your financial situation and find a mortgage with great interest rates that fit your needs today and in the future. Give us a call. We're here to help!