Federal and Provincial Aid for Home Owners
Both the federal and Ontario provincial 2009 budgets introduced some financial relief for both current and prospective homeowners. The following is a summary of both the old and new programs now in place.
Home Buyers’ Plan
The Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $25,000 in a calendar year from your RRSPs to buy or build a qualifying home (a housing unit in Canada).
The home can be for you, or it can be for a related person with a disability.
You do not have to include eligible withdrawals in your income, and your RRSP issuer does not withhold any tax. If you buy the qualifying home with your spouse or common-law partner or with other individuals, each of you can withdraw up to $25,000. However, your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP or they may not be deductible for any year.
You must begin repaying all of your withdrawals beginning the second year after you withdraw under the HBP. You must repay the full amount within 15 years upon start of repayment. Generally, for each year of your repayment period, you have to repay 1/15 of the total amount you withdrew until the full amount is repaid to your RRSPs. If you do not repay the full amount due for a year, the difference will have to be included in income for that year. If you repay more than the amount that you are required to pay for that year then annual repayment will be reduced in subsequent years to reflect the overpayment.
There are a number of conditions which must be met before you may participate in the HBP, the most important of which is the condition that you must be a first-time home buyer ( a list of all the conditions can be found on page 5 in the following HBP guide: http://www.cra-arc.gc.ca/E/pub/tg/rc4135/). You are not considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence. For example, if you owned a home and sold it in 2005, you would have to wait until 2010 to participate in the HBP.
For more information on the HBP please see http://www.cra-arc.gc.ca/E/pub/tg/rc4135/.
Home Renovation Tax Credit
Home renovations are smart investments in the long term value of a home. They also create economic activity by increasing the demand for labour, building materials, and other goods. Therefore, to produce some fiscal stimulus and encourage investments in Canada’s housing market, the Federal Budget 2009 has proposed a temporary Home Renovation Tax Credit (HRTC).
The HRTC will apply to eligible home renovation expenditures for work performed and for goods purchased in the period after January 27, 2009 and before February 01, 2010. It may be claimed for renovations and enduring alterations to a dwelling or the land on which it sits. Routine repairs and maintenance will not qualify for the credit, nor will the cost of acquiring tools or furniture and appliances. The credit can be claimed on eligible expenditures incurred on more than one dwelling. Eligible properties include houses, cottages, and condo units.
The 15% credit may only be claimed on eligible expenditures in excess of $1,000 but less than $10,000. For example, if you have a total of $3,500 in eligible expenses then you will receive a credit of 15% X $2,500 = $375. The maximum credit you can receive is 15% X $9,000 = $1,350.
First-Time Home Buyers’ Credit (HBTC)
For 2009 and subsequent years the Federal 2009 budget proposes to introduce a new tax credit worth $750 for certain home buyers that acquire a qualifying home (a housing unit in Canada) after January 27, 2009.
You will qualify for the HBTC if you acquire a qualifying home and neither your nor your spouse or common-law partner owned or lived in another home in the year of purchase or any of the four previous years.
ecoENERGY Retrofit-Homes Program
The ecoENERGY Retrofit program provides home and property owners with grants up to $5,000 per unit to offset the cost of making energy efficiency improvements. The total grant amount available per individual or entity for eligible properties over the life of the program is $500,000. The grant is based on how effective the upgrades are in saving energy, not on the cost of the upgrade.
Only homes that have undergone a residential energy efficiency assessment by an energy advisor will be eligible for grants. For more questions regarding the program, a list of eligible improvements/retrofits, and the grant amounts please see the following link:
In addition, most provinces have complementary programs offering further financial assistance based on your residential energy efficiency assessment. In particular, the province of Ontario have the Home Energy Audit Program and the Retrofit Rebate Program. A home energy audit identifies how your home uses energy, where it is being wasted, and recommends solutions to fix the energy leaks. The government of Ontario will pay 50%, up to $150, for this audit. The Retrofit program awards homeowners up to $5,000 in eligible improvements, matching the amount available from the federal government. For more questions regarding the program, a list of eligible improvements/retrofits, and the grant amounts please see the following link:
Check the following webpage for programs offered in other provinces:
Land Transfer Tax Refund for First-Time Home Buyers
First-time home buyers in Ontario may be eligible for a refund of the land transfer tax paid when purchasing a home. The maximum amount of the refund is $2,000. To be eligible you must be 18 years of age or older, you must occupy the home as your principal residence within 9 months of transfer, and you or your spouse or common-law partner cannot have previously owned a home.
Ontario Provincial Tax Rebate
When the Ontario provincial government announced its 2009 budget they introduced a plan to rebate 75% of provincial tax paid to purchasers of newly constructed homes under the price of $400,000. The rebate would be reduced for homes between the prices of $400,000 and $500,000