Canadian homeowners have several home tax deductions that they can claim as they look for ways to lower their tax bill.
TurboTax reminds us there are opportunities to save money — and be sure to keep your receipts.
First-time homebuyers' tax credit
If you are buying a home for the first time, you can claim a non-refundable tax credit of up to $750. This new non-refundable tax credit is based on a percentage of $5,000. You or your spouse or common-law partner can claim the homebuyers' tax credit.
The Home Buyers' Plan allows you to withdraw up to $25,000 from your registered retirement savings plan (RRSP) to help with the purchase or construction of a home. Certain conditions apply. Submit a request by completing the T1036 tax form that is available. Remember, this money has to be paid back into your RRSP over a 15-year period. To the extent you miss a payment it will be taken into income and you will be tax accordingly.
Home accessibility tax credit (HATC)
Renovations that make homes safer or more accessible for seniors or the disabled may qualify for a new tax credit in 2016. If you are a senior or hold a valid disability tax certificate or are supporting a qualifying individual, up to $10,000 in expenses can be claimed under the HATC. And when it comes to medical tax expense credits the government provides an extensive list of eligible medical expenses you can claim and those that you cannot.
If you rent a property you own or that you have use of, use the T776 tax form to report rental income and claim allowable expenses such as advertising, insurance and interest on money you borrow to buy or improve the property.
Taxpayers who work from home
If you work from home, there are a number of expenses that you can deduct if you are either self-employed, a commissioned employee or a professional. Examples of the type of expenses that you can claim include heating, home insurance, electricity and cleaning materials.
Selling a home
Generally, the GST/HST does not apply when you sell your home, but there are cases where it does. For example, if you built the home, you may have to pay the GST/HST. If the home you sell is not your principal residence, you have to report the capital gains. Also, there are a number of moving tax deductions available to you.
David Lee, Financial Advisor at BlueShore Financial, suggests that we don't forget the following:
- Relocation expenses
If you moved or had to establish a new home, to work or run a business at a new location, you could be eligible to claim moving expenses including mortgage penalties or sales commission for your new home.
- Investment carry costs
If you borrow money to use for investment purposes, in some cases, you can deduct these expenses. Additionally, if you pay fees related to managing your investments you may be eligible to claim these costs as well.
- Max out on charitable giving
You can claim eligible charitable donations that, depending on the amount you donate, could result in an impactful tax credit. Generally, you can claim all or part of eligible donations, up to the limit of 75 per cent of your net income. Maxing out on this limit will help the charities you support and help bring your taxable income lower.
There are also regional tax credits worthy of investigation.
There aren't a lot cost savings strategies when it comes to owning a home so homeowners owe it to themselves to be tax savvy when it comes to filing their returns.