Taking Advantage of Taxes

Ontario homeowners have begun to receive updated property
assessments in their mailboxes this fall and given that
the average increase is five per cent, many are concerned
about the impact, should municipalities hike property taxes
in 2009. While property tax is a significant cost of homeownership,
there are a number of tax benefits to be gained
by owning real estate.
The most notable tax benefit of owning a home is the capital
gains tax exemption. Simply put, when you sell your
principal residence, you are not required to pay tax on the
profit you make from the sale.
Another key benefit is the GST exemption on all resale
homes. New homes are subject to the GST however; rebates
for houses up to $450,000 are available. (In the Greater Toronto
Area most builders include the GST in the price of the
house and therefore any rebate is assignable to them.)
If you’re planning to buy a home for the first time, you are
eligible to receive rebates of the provincial and Toronto land
transfer taxes. The maximum provincial land transfer tax
(LTT) rebate for first-time buyers is $2,000 and the maximum
Toronto LTT rebate for first time buyers is $3,725.
Every first-time homebuyer can also make a tax-free withdrawal
of up to $20,000 from RRSPs that have been owned
for at least 90 days, provided the funds are repaid into an
RRSP with 15 years. Some existing homeowners can also
utilize this benefit, called the Homebuyers’ Plan, provided
they are purchasing a home that is more accessible or suited
to the care of a disabled dependent relative who qualifies
for the disability tax credit.
Seniors with an income threshold of $23,820 and others with
low to moderate incomes can get a break on their housing
costs by claiming the property tax credit on their federal
income tax returns. This applies to Ontario residents at least
16 years of age (for whom the Canada Child Tax Benefit is
not being received) paying, or having paid for them, rent or
property tax on a principal residence in the province. The
amount you receive depends on your age and income.
If you’re planning to buy an additional property for investment
purposes, the rental income you achieve is taxable
however; the expenses of operating your rental property are
deductible from your rental income. Expenses such as
property taxes, insurance and repairs on the property can
all be deducted.
When it comes time to sell your investment, any profit you
make will be taxed as a capital gain however; from a tax
perspective, a capital gain is a preferred form of income.
The taxable portion of a capital gain is significantly lower
than income earned by employment, business, interest or
dividends.
As there are many provisions to most tax rules, be sure
to consult your REALTOR® and your financial advisor for
full details. As well, for information on more government
programs for homeowners and homebuyers, visit www.TorontoRealEstateBoard.
com

Maureen O’Neill is President of the Toronto Real Estate
Board, a professional association that represents 28,000
REALTORS® in the Greater Toronto Area. For more information
please visit www.TorontoRealEstateBoard.com.