Are you currently pre-approved for a mortgage? Spending your weekends visiting open houses and closely monitoring headlines about the housing market for buying a house? It seems like you’re feeling prepared to take the leap and buy a house. However, before you make this significant and crucial purchase, it’s essential to be aware of the tax implications involved. Let’s explore what you should know before proceeding with your decision.
Maximize Your Home-Buying Benefits: Tax Implications for First-Time and Repeat Buyers
Are you a property virgin, eager to say goodbye to rent payments and embrace the benefits of homeownership? As a first-time homebuyer, you’re in luck! The First-time Home Buyers’ Tax Credit offers a generous $5,000 credit, providing you with $750 in valuable tax savings. Plus, if you’re purchasing your first home alongside your significant other, you can even split the credit between you. Best of all, there’s no need for a specific receipt to claim this credit; you just need the necessary paperwork proving your home purchase if the Canada Revenue Agency (CRA) requests it.
Being a first-time homebuyer also grants you the opportunity to tap into your Registered Retirement Savings Plan (RRSP) to facilitate your purchase. Through the Home Buyers’ Plan, you can borrow up to $25,000 tax-free within a year. Keep in mind that this amount is a loan, and you’ll have a two-year grace period before repayment begins.
Buying a House: Already experienced the joys of homeownership.
If this isn’t your first rodeo, chances are you’re selling your principal residence. But what does this mean for taxes? The CRA implemented a few changes last year, introducing an additional step when selling your house—reporting it. If you’ve recently sold your home or plan to do so this year, make sure to report it on Schedule 3, Capital Gains, when filing your income tax return.
The good news is that as long as you designate the property as your principal residence for every year you owned it, you won’t have to pay taxes on the capital gain (i.e., the profit from the sale) thanks to the principal residence exemption. Remember, you can only designate one home as your principal residence for a specific year.
While no tax credits are available for regular home renovations that make your space cozier, there is a non-refundable tax credit for renovations that enhance accessibility. If you make improvements to your principal residence to make it more accessible to seniors or disabled individuals, you can claim expenses up to $10,000.
Make your new house a tax-savvy home by understanding these valuable implications, whether you’re a first-time buyer or a seasoned homeowner.