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First-Time Home Buyers’ Tax Credit

      Budget 2009 proposes to introduce a new non-refundable tax credit based on an amount of $5,000 for first-time home buyers who acquire a qualifying home after January 27, 2009 (i.e. the closing is after that date). The credit for a taxation year will be calculated by reference to the lowest personal income tax rate for the year and is claimable for the taxation year in which the home is acquired.

      An individual will be considered 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 of the home purchase or in any of the four preceding calendar years. A qualifying home is one that is currently eligible for the Home Buyers’ Plan that the individual or individual’s spouse or common-law partner intends to occupy as the principal place of residence not later than one year after its acquisition.

      Budget 2009 also proposes that the credit be available for certain acquisitions of a home by or for the benefit of an individual who is eligible for the disability tax credit (DTC). In particular, the credit will be available in respect of a home acquired after January 27, 2009 (i.e. the closing is after that date) by an individual who is eligible for the DTC, or by an individual for the benefit of a related individual who is DTC-eligible, if the home is acquired to enable the DTC-eligible individual to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.

     For the purpose of this credit, a "DTC–eligible" individual is an individual in respect of whom an amount is deductible under the DTC for the taxation year in which the agreement to acquire the home is entered into, or would be deductible if costs for an attendant or care in a nursing home were not claimed for Medical Expense Tax Credit purposes by or on behalf of that person. Where the home is acquired by or for the benefit of a DTC-eligible individual, the home must be intended to be the principal place of residence of that individual no later than one year after its acquisition.

      The credit may be claimed by the individual who acquires the home or by that individual’s spouse or common-law partner. For the purpose of this credit, a home is considered to be acquired by an individual only if the individual’s interest in the home is registered in accordance with the applicable land registration system.

      Any unused portion of an individual’s First-Time Home Buyers’ Tax Credit may be claimed by the individual’s spouse or common-law partner. Where more than one individual is entitled to the First-Time Home Buyers’ Tax Credit (for example, where two individuals jointly buy a home), the total amount of the credits claimable for the year by those individuals shall not exceed the maximum amount of the credit that would be claimable for the year by any one of those individuals.
 
To read more about the 2009 Federal Budget, visit http://www.budget.gc.ca/2009/home-accueil-eng.asp.
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New Federal Budget Changes

      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 instalments 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.
     
      For more information on the 2009 Federal Budget, visit http://www.budget.gc.ca/2009/home-accueil-eng.asp.
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Home renovations are smart investments in the long term value of a home and also create economic activity by increasing the demand for labour, building materials and other goods. Renovations can also reduce energy consumption and the long-term cost of owning a home.
      To provide some $3 billion of much-needed fiscal stimulus and encourage investments in Canada’s housing stock, Budget 2009 proposes to implement a temporary Home Renovation Tax Credit (HRTC).
 
Temporary, Timely and Targeted Stimulus
 The HRTC will apply to eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The temporary nature of the credit will provide an immediate incentive for Canadians to undertake new renovations or accelerate planned projects.    
      The HRTC can be claimed for renovations and enduring alterations to a dwelling, or the land on which it sits.
 
How the HRTC Will Work
The 15-per-cent credit may be claimed on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, meaning that the maximum tax credit that can be received is $1,350.The credit can be claimed on eligible expenditures incurred on one or more of an individual’s eligible dwellings.
      Properties eligible for the HRTC include houses, cottages and condominium units that are owned for personal use. Renovation costs for projects such as finishing a basement or re-modelling a kitchen will be eligible for the credit, along with associated expenses such as building permits, professional services, equipment rentals and incidental expenses.
      Routine repairs and maintenance will not qualify for the credit. Nor will the cost of purchasing furniture, appliances, audio-visual electronics or construction equipment.
 
Who Can Claim the HRTC?
  • About 4.6 million families in Canada are expected to benefit from the credit.
  • Taxpayers can claim the HRTC when filing their 2009 tax return.
  • Eligibility for the HRTC will be family-based. For the purpose of the credit, a family is generally considered to consist of an individual, and where applicable, the individual’s spouse or common-law partner.
  • Family members will be able to share the credit.

Examples of HRTC Eligible and Ineligible Expenditures

Eligible

  • Renovating a kitchen, bathroom, or basement
  • New carpet or hardwood floors
  • Building an addition, deck, fence or retaining wall
  • A new furnace or water heater
  • Painting the interior or exterior of a house
  • Resurfacing a driveway
  • Laying new sod

Ineligible

  • Furniture and appliances (refrigerator, stove, couch)
  • Purchase of tools
  • Carpet cleaning
  • Maintenance contracts (furnace cleaning, snow removal, lawn care, pool cleaning, etc.)

Additional information on the Home Renovation Tax Credit will soon be available on Canada Revenue Agency’s website at www.cra-arc.gc.ca.

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