Homebuyers, small businesses catch break

The stimulus wave unleashed in yesterday's federal budget will provide only ripples of tax relief for individual Canadians. But small business owners and first-time homebuyers are catching a significant break.

Ottawa will allow first-time purchasers of homes to withdraw as much as $25,000 from their RRSPs for the purchase, up from $20,000, and also provide a new tax credit of $750.

"For a young couple starting out, this is significant," said Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management. "Together, they could withdraw $50,000 and get an extra $750. There's certainly incentive to jump into the market."

If their purchase needs renovations totalling more than $1,000, they might also qualify for Ottawa's new tax credit for home renovations. It's open to everyone and calculated as 15 per cent (to a maximum of $1,350) on amounts above $1,000, for eligible work performed or goods acquired for homes, cottages or condos, through Feb. 1, 2010.

There's a potential provincial credit as well, on renovation projects costing at least $7,500. Quebec unveiled its own renovation credit this month, but as often happens, the two programs aren't synchronized. Quebec's refundable credit is 20 per cent of payments in excess of $7,500, to a maximum of $2,500 (for projects costing at least $20,000).

So the investment space where renovators in Quebec are eligible for both credits is a relatively narrow: $7,500 to $10,000.

The programs also have different eligibility requirements, so home owners should read up on both thoroughly before undertaking any project, said Marie-Claude Riendeau, director of tax and estate planning for Investors Group in Quebec.

Accountant Pierre Kirouac of RSM Richter said getting almost $4,000 back on a $20,000 renovation is enough to make it interesting, and one of the dividends of the two programs is that they may squeeze out under-the-table work.

"The money's in the system, so taxes will be paid at the end of the day," he said.

Click here to read full article published in the Gazette Jan 2815, 2009 by PAUL DEELEAN


Marlene Ofter

Marlene Ofter

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