In Canada the cost of home you purchase cannot be claimed as a deductible expense. But that does not mean you will not save anything in taxes. There are seven pro tips on how owning a house can help you save this tax season;
1) Sale Profit: Most people are already aware that any capital gain on the sale of your principal home is considered tax-free profit. But in order to not step out of bounds with the Canada Revenue Agency make sure you and your family unit only designate one property as a principal residence. A family unit, for tax purposes, consists of you, your spouse (or common-law partner) and any unmarried children under the age of 18.
Ordinarily you have to inhabit a place regularly to call it your principle home, although there are options to designate a recreational property as a primary home. This is best done when there’s been little appreciation on your city-home, but a spike in value on your cottage. But talk to a tax specialist to confirm the best way of going about this.
2) Loan: The Home Buyer’s Plan allows you to borrow, tax-free, up to $25,000 from your RRSP for the purpose of buying or building a home. The great news is that each half of a couple can withdraw up to $25,000, tax-free, from their own RRSPs. But you must be first-time homebuyers. And you cannot have owned or occupied your own home up to four years before the year you made the withdrawal.
You will be required to pay 1/15th of the loan each year for the next 15 years. But there will be no interest charges and no taxes incurred.
3) First Time Buyer Benefit: In 2009 the federal government introduced a new tax
Credit for first time home buyers;
· If you buy a home and you and your spouse haven’t owned any home in the last five years then you are entitled to a tax credit
· You can claim a maximum tax credit of $750 and may be claimed by either spouse, or both, as long as the total doesn’t exceed $750.
4) Work From Home: By creating a home-based business—even a part-time business—you are entitled to claim a deduction for a portion of home costs. This includes: mortgage interest, property taxes, utilities, repairs, landscaping and maintenance costs.
Just remember that you have to have a reasonable expectation of profit in order for the business to be legitimate, according to the tax man.
5) Rent: Another way to claim a deduction for a portion of home costs is to rent out a room or part of your residence to a tenant.
Your property is still considered your principal residence (even it’s used to earn income) as long as the revenue-generating portion of your home is not the main use of your home.Also, don’t make any structural changes to your home or claim any capital cost allowance deductions.
6) Moving: If you move 40 kilometres closer to work or school and you could be eligible for some serious deductions. That’s because almost every expense associated with moving can be deducted. This includes the cost of selling your old home and purchasing your new home, including realtor commissions, legal fees, even your mortgage penalties are dollar-for-dollar tax deductible.
You can also deduct all travelling expenses, such as fuel and maintenance for your car as well as transportation and storage costs, including insurance, for your household effects. This includes up to 15 days of meals and temporary accommodation, while travelling to the new home, as well as the cost of revising legal documents, such as driver’s license or utility hook-ups.
7) Renovate for medical reasons: If you have mobility issues and you require renovations you may be able to claim this expense. Just remember that medical expense reimbursements need to fall within a 12-month period ending in the current tax year.