Buying, Renovating Homes Key to Stimulating Economy  The Federal Budget 2009 introduced several incentives to get Canadians spending by buying a first time home, or renovating the one they are already in.
RRSP Home Buyers Plan Changed
The 2009 budget increases the withdrawal limit for the RRSP Home Buyers Plan to $25,000 from $20,000 providing first-time home buyers with additional access to savings to purchase or build a home. The eligibility and repayment rules remain pretty much the same. The money withdrawn from the RRSP must be repaid over a period of no more than 15 years to retain its tax deferred status. The repayment period starts the second year following the year the first withdrawals were made. If a participant pays less than the scheduled annual payments, the amount that they don’t repay must be reported as income on their tax return for that year. For example, in October 2009 a first time buyer withdraws $24,000 from his or her RRSP to finance the purchase of a home. Their first annual repayment of $1,600 ($24,000 divided by 15 years) is due by December 31, 2011. Buyers Get a Tax Credit
For 2009 and subsequent years, the budget also introduced a new non-refundable tax credit to help first-time home buyers with some of their closing costs. This Home Buyer Tax Credit (HBTC) will provide up to $750 in tax relief on the purchase of a first home. 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. To qualify for the HBTC, an individual must purchase a qualifying home and neither the homebuyer or the homebuyer’s spouse or common-law partner can have owned and lived in another home in the year of purchase or any of the four preceding years. A qualifying home is a housing unit located in Canada including 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. A share in a co-operative housing corporation that entitles the individual to possess and gives an equity interest in a housing unit also qualifies. However, a share that only provides a right to tenancy in the housing unit does not qualify. Grants for Eco-Friendly Upgrades
The ecoENERGY Retrofit program provides home and property owners with grants of up to $5,000 to offset the costs of making energy-efficiency improvements. Grants apply to a variety of measures that reduce energy consumption – anything from increasing insulation to upgrading a furnace. Building on the success of the existing program, Budget 2009 provides an additional $300 million over two years to the ecoENERGY Retrofit program to support an estimated 200,000 additional home retrofits. Land Transfer Tax Refunds for First-Time Homebuyers Land transfer tax applies to all conveyances of land in Ontario. First-time homebuyers may be eligible for a refund of all or part of the tax payable. - For agreements of purchase and sale entered into before December 14, 2007, the refund only applies on the purchase of a newly constructed home.
- For agreements of purchase and sale entered into after December 13, 2007, the refund applies to all homes, whether newly constructed or resale.
The amount of the refund claimed will, if granted, offset the land transfer tax payable. The maximum amount refundable is $2,000. Examples: | Cost of Home | Tax Payable | Tax Refund | Net Tax Payable |
|---|
| $100,000 | $725 | $725 | $0 | | $200,000 | $1,725 | $1,725 | $0 | | $300,000 | $2,975 | $2,000 | $975 |
There is no interest paid on this refund. Limitations The refund will be reduced if one or more of the purchasers are not a first-time home purchaser. The refund will be proportionate to the interest acquired by the individuals who qualify for the refund. For example, where a parent who is not a first-time purchaser and a child who is a first-time purchaser, purchase a home with equal 50/50 interests, the child may claim 50% of the land transfer tax refund. The child's claim cannot exceed 50% of the maximum allowable refund (i.e. 50% of $2,000). A qualifying purchaser may also claim a refund in proportion to his or her spouse's interest if that purchaser's spouse has owned a home before becoming the purchaser's spouse, but not while that purchaser's spouse. Home Renovation Tax Credit
The proposed Home Renovation Tax Credit (HRTC) will provide a temporary 15 per cent income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010. The credit may be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, and will provide up to $1,350 in tax relief. For more information on all of the home ownership and housing related stimulus in Budget 2009, go to http://www.budget.gc.ca/2009/plan/bpa5a-eng.asp#Personal or to the Canada Revenue Agency Web site at www.cra-arc.gc.ca and search for “Home Buyers Plan.” 
What’s eligible and what’s not for the Home Renovation Tax Credit?
The federal government hopes the Home Renovation Tax Credit (HRTC) will get Canadians spending now to help create jobs in industries typically hurt by an economic downturn. Now through January 31, 2010, homeowners can claim a tax credit for 15 per cent of renovation expenses between $1,000 and $10,000. Here’s a sample of what qualifies under the program and what does not. 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 - purchase of furniture and appliances (e.g. refrigerator, stove, and couch)
- purchase of tools
- carpet cleaning
- maintenance contracts (e.g. furnace cleaning, snow removal, lawn care, and pool cleaning
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