2009 Canadian Federal Budget is out. Announced by the Federal Conservatives and Stephen Harper's minority government, we have all seen what the "Budget Fallout" has been. From the New Foundland Premier's comments about Prime Minister Stephen Harper, to the official opposition Liberal party leader Michael Ignatieff's press briefing and to NDP leader Jack Layton's allegation of Harper and Ignatieff's "new coalition".
But what does the Federal Budget mean for the REALTORS® and the Canadian real estate consumer.
It could be said that the lobbying efforts of REALTORS® have achieved significant victories. In particular, the expanding the RRSP Homebuyers' Plan to make it more useful for homebuyers is a significant step forward. The federal budget proposes to increase the withdrawal limit for first-time homebuyers using the Homebuyers Plan from $20,000 to $25,000 (per individual). Under this program, first-time homebuyers are allowed to withdraw funds from their RRSP, tax-free, to put towards the down payment on a home. Amounts withdrawn under the Home Buyer's Plan must be repaid over a 15-year period, starting the second year following the year of the withdrawal.
Since 1992, an estimated 2 million Canadians have used the Home Buyers' Plan to purchase approximately 900,000 homes, making this program a huge success. Unfortunately, as time has passed, the usefulness of this program eroded because withdrawal limits were not adjusted.
Under the first time home buyer's tax credit, the Budget proposes a 15 per cent credit that would be applied to a $5,000 amount, and would provide up to $750 in tax relief to reduce costs associated with first home purchases. This will assist the first-time home buyers with the costs related to the purchase of a home such as legal fees, land transfer taxes, etc. 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.
The Budget also proposes a 15 per cent Home Renovation Tax Credit, to be claimed on the portion of eligible home renovation expenditures exceeding $1,000, but not more than $10,000, meaning that the maximum tax credit that can be received is $1,350. This 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. Credit can be claimed on eligible expenditures incurred on one or more of an individual's eligible dwellings, including houses, cottages, and condominium units 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.
Additional information on the Home Renovation Tax Credit will soon be available on Canada Revenue Agency's website at www.cra-arc.gc.ca
All of this will of course only become a reality if the budget passes the vote in the House of Commons. Let's see how it unfolds.