As tax season approaches, the Canada Revenue Agency (CRA) is reminding Canadians of various housing-related tax incentives that can help reduce costs and maximize savings.
These measures, designed for first-time homebuyers, recent homeowners, and those upgrading or renting out properties, include programs like the Home Buyer’s Plan (HBP), First Home Savings Account (FHSA), and renovation tax credits. Additionally, new rules impact property flipping, short-term rentals, and purpose-built rental housing.
If You Bought a New Home in the Last Year:
Home Buyers’ Amount: The Home Buyers’ Amount offers eligible individuals a tax credit of up to $1,500 for purchasing their first qualifying home in 2024. The home must be a qualifying property in Canada, including single-family homes, townhouses, mobile homes, or condos, intended as a principal residence.
- The $10,000 claim can be split between spouses or common-law partners.
- Eligibility requires no homeownership in 2024 anywhere in the world or the previous four years unless you qualify for the Disability Tax Credit (DTC) or acquired the home for someone eligible for the DTC.
If You Renovated Your Home in the Last Year:
Home accessibility tax credit (HATC): The Home Accessibility Tax Credit (HATC) allows homeowners aged 65 or older or those eligible for the Disability Tax Credit (DTC) to claim up to $20,000 in renovation expenses for a tax credit of up to $3,000.
- Eligible renovations must enhance mobility, functionality, or safety within the dwelling or in accessing it.
- Qualifying individuals include seniors or DTC recipients. Eligible individuals, such as close relatives or caregivers, may also claim the credit if they provide support or meet caregiving eligibility requirements.
Multigenerational home renovation tax credit (MHRTC): MHRTC offers a refundable credit of up to $7,500, calculated as 15% of renovation expenses up to $50,000, to create a self-contained secondary unit.
- Renovations must enable a senior or an adult eligible for the Disability Tax Credit (DTC) to live with a qualifying relative.
- The MHRTC can be claimed on the Income Tax and Benefit Return, provided the renovation and occupants meet specific eligibility criteria.
GST/HST New Housing Rebate: The GST/HST New Housing Rebate allows eligible individuals to recover some GST or the federal portion of HST paid on a newly built or substantially renovated home used as their or a relative’s primary residence. Provincial rebates may also apply for the provincial HST portion.
- Eligibility applies to homes bought from builders, shares in cooperative housing, or homes constructed or renovated personally or through hired contractors.
- The rebate extends to mobile and floating homes under specific conditions, with options for treating such properties as builder-purchased or owner-built.
If You Sold Your Home Last Year
Principal Residence Exemption: The Principal Residence Exemption allows homeowners to reduce or eliminate taxes on capital gains from selling their principal residence. If the property served as a principal residence for the entire ownership period, no tax is due on the gain. Partial exemptions apply if the property was not the principal residence for some years. The property must meet ownership, residency, and designation criteria and typically includes land up to 1.24 acres, with exceptions for larger municipally mandated lots.
- You must make sure you report the disposition and designate the property as your principal residence on your tax return to take advantage of this exemption.
Residential Property Flipping Rule: The Residential Property Flipping Rule states that if you sell a property owned for less than 365 days without qualifying for a life event exception, any profit from the sale will be taxed as ordinary business income rather than as capital gains.
Exceptions include the taxpayer’s or a related person’s death, household changes (e.g., marriage or caregiving), marital breakdown after 90 days of separation, personal safety threats, serious illness, eligible relocation, job loss, insolvency, or property destruction or expropriation.
If You Are Saving For Your First Home
Home Buyer’s Plan: The enhanced Home Buyers’ Plan (HBP) allows tax-free withdrawals of up to $60,000 from Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home.
- Withdrawals made between January 1, 2022, and December 31, 2025, have an extended three-year grace period, with repayments starting in the fifth year after the initial withdrawal.
- Both you and your spouse or common-law partner can participate in the HBP for the same home, providing greater flexibility and support for homebuyers.
First Home Savings Account (FHSA): You can contribute up to $8,000 annually to a First Home Savings Account (FHSA), with a lifetime limit of $40,000.
- Contributions, including unused amounts from 2023, may be deductible on your 2024 tax return. If you opened your first FHSA in 2024, you can claim up to $8,000 in contributions made by December 31, 2024.
- Unused FHSA contribution room can be carried forward to future years, offering flexibility in maximizing savings.
You can withdraw amounts from your RRSPs under the HBP and make a qualifying withdrawal from your FHSAs for the same qualifying home, as long as all the conditions are met at the time of each withdrawal.
Other House-Related Tax Rules
The Purpose-Built Rental Housing (PBRH): This rebate enhances the GST/HST new residential rental property rebate, supporting the development of long-term rental housing, including apartments, student housing, and seniors’ residences.
- Eligible landlords or builders can claim the rebate for newly constructed, renovated, or self-supplied rental properties, provided fair market value criteria are met.
- Residential units must be valued below $450,000, and land in trailer parks below $112,500.
Underused housing tax (UHT): The Underused Housing Tax (UHT) is a 1% federal tax on vacant or underused housing, primarily targeting foreign owners but potentially affecting some Canadian owners. The CRA offers an online self-assessment tool to help property owners determine if they need to file a return or qualify for an exemption from the tax.
Short-Term Rentals: Income from short-term rentals, such as those listed on Airbnb or VRBO, must comply with local operating, licensing, registration, and permit requirements. Short-term rentals are properties rented for less than 90 consecutive days, including homes, apartments, or cottages.
- Non-compliant rentals cannot deduct related expenses, including interest, incurred after 2023. Compliance is crucial to avoid financial penalties.
CRA says by understanding these initiatives and filing a complete tax return, Canadians can take full advantage of these opportunities to better manage housing expenses and achieve financial benefits.