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.