Stimulating the Housing Industry

Three Government Motions to Stimulate the Housing Industry

1. First-Time Home Buyers’ Tax Credit (HBTC)

For 2009 and subsequent years, the budget proposes to introduce a new non-refundable tax credit, based on an amount of $5,000, for certain home buyers that acquire a qualifying home after January 27, 2009 (i.e., closing after this date).

How is the new HBTC calculated?
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.

Who is eligible for the HBTC?
An individual will qualify for the HBTC if:

- they acquire a qualifying home; and

- neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the year of purchase or any of the four preceding years.

If you are a person with a disability or are buying a house for a related person with a disability, you do not have to be a first time home buyer. However, the home must be acquired to enable the person with a disability to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.

What is a qualifying home?
A qualifying home is a housing unit located in Canada. This includes 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.

How will I claim the HBTC?
Beginning with the 2009 personal income tax return, a new line will be incorporated to allow you to claim the credit.

Source: Canada Revenue Agency
For full information, visit http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html

2. Home Renovation Tax Credit (HRTC)

To stimulate economic growth and encourage Canadians to invest in improvements to their homes, Budget 2009 proposes to introduce a temporary Home Renovation Tax Credit (HRTC). The HRTC will provide meaningful tax relief to help Canadian homeowners make improvements to their property while promoting broad-based economic activity.

Under proposed changes, you can claim a non-refundable tax credit on your 2009 income tax return based on eligible expenditures incurred for work performed or goods acquired after January 27, 2009, and before February 1, 2010, in respect of an eligible dwelling. The Home Renovation Tax Credit (HRTC) applies to eligible expenditures of more than $1,000, but not more than $10,000, resulting in a maximum credit of $1,350 [($10,000 - $1000) x 15%].The credit will apply to expenditures in excess of $1,000, but not more than $10,000, resulting in a maximum credit of $1,350 ($9,000 x 15%).

Eligibility
In determining whether you are eligible to claim the Home Renovation Tax Credit (HRTC), you will need to take the following factors into account:

- Your dwelling must qualify. Generally, any dwelling that you own and is used personally by you or your family can qualify, including your home or cottage.

- Eligibility for the HRTC is family based. A family will be allowed a single credit that may be shared within the family.

- To be eligible, expenditures incurred in relation to a renovation or alteration to an eligible dwelling (or the land that forms part of the eligible dwelling) must be of an enduring nature and integral to the dwelling.

- The expenditures must have been incurred after January 27, 2009 and before February 1, 2010, according to an agreement entered into after January 27, 2009.

Source: Canada Revenue Agency
For full information, visit http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/hmwnr/hrtc/menu-eng.html

3. Home Buyers’ Plan (HBP)

The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw amounts from a Registered Retirement Savings Plan (RRSP) to purchase or build a home without having to pay tax on the withdrawal. Budget 2009 proposes to increase the HBP withdrawal limit to $25,000 from $20,000.

For HBP purposes, an individual is generally considered to be 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 in which the HBP withdrawal is made or in any of the four preceding calendar years. Special rules apply to facilitate the acquisition of a home that is more accessible or better suited for the personal needs and care of an individual who is eligible for the disability tax credit, even if the first-time home-buyer requirement is not met. These rules will also be modified to provide the same $25,000 withdrawal limit.

Withdrawn funds must generally be used to acquire a home before October of the year following the year of withdrawal. Amounts withdrawn under the HBP are repayable in installments over a period not exceeding 15 years. To the extent that a scheduled repayment for a year is not made, it is added to the participant’s income for the year. A special rule denies an RRSP deduction for contributions withdrawn under the HBP within 90 days of being contributed.

This increase in the HBP withdrawal limit will apply to the 2009 and subsequent calendar years in respect of withdrawals made after January 27, 2009.