Tax series: House fairy tale or fairy tale house? Tax know-how can help

If buying a house has always seemed like a fairy tale to you then you should know that there are some tax breaks that could help you ground that dream in reality.

I grew up listening to the magical tale of Hansel and Gretel and the delicious gingerbread house in the forest. Now I’m a mom and every year I throw all my holiday decorating efforts into making a gingerbread house the old-fashioned way. Granted, my son admires it for a few minutes once we’ve finished decorating it, but he soon asks when he can do the real Hansel and Gretel thing and start breaking off pieces to eat. And of course in late December he channels his inner Hulk, turning the house into rubble with the help of a rolling pin.

I’ve certainly had enough house-building and decorating to last me until next December. But maybe you’re thinking about investing in something more lasting than a gingerbread house for 2014? If buying a house has always seemed like a fairy tale to you then you should know that there are some tax breaks that could help you ground that dream in reality.

Here are some examples. If you’ve been building up your RRSP but don’t have money set aside for a down payment on a home then the Homebuyers Plan may let you take up to $25,000 out of your RRSP tax-free to spend on a property. Usually you would have to pay tax on an RRSP withdrawal so the Homebuyers Plan gives you access to your RRSP funds without the tax cost – keep in mind that you will have to repay the money to your RRSP over a fifteen-year period.

If you’re buying your first home in 2014 you might also be able to claim the First Time Home Buyer’s tax credit when you file your tax return next year. The maximum credit is $750 but if you’re buying the house together with someone else then you must share the credit. Even though the credit is known as the “first time buyer’s” credit, you may still qualify for the credit if you owned a home several years ago but have not owned one recently.

Buyers of new homes or people who build a new home or substantially renovate an existing home may be able to claim a rebate for some of the GST or HST related to buying or renovating the home. To be able to qualify, the fair market value of the house has to be less than $450,000.

As with all tax credits and programs there are conditions that determine whether or not you will be eligible so the first step is to do your research. You can use the information on the Canada Revenue Agency website to find out more and to see whether you meet all the requirements. 

About the Author

Gael Melville


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