As tax time approaches, don’t forget to take advantage of any deductions, credits, and benefits that might be available to you right in your own home.
It doesn’t matter whether you live in a huge mansion or the tiniest of condominiums, whether it’s a downtown dwelling or a remote cabin by the lake. Provided you own your home, there are several potential tax benefits to be had.
Here’s a closer look at some of the different tax benefits Ontario homeowners may be eligible to take advantage of.
Ontario Home Buyers’ Tax Credit
If you bought property for the first time in the previous tax year, and neither you nor your spouse owned a home in the preceding four years, you can receive a 15 percent credit on expenses up to $5,000, which will put $750 back in your pocket. This credit is intended to help people cover the costs associated with a new home purchase, such as legal fees and land transfer taxes.
Borrow tax-free from your RRSP
Qualified first-time homebuyers can help fund their property purchase with the Home Buyer’s Plan. Under the plan, you can withdraw up to $35,000 from your RRSP to put towards a home purchase, and you’re exempted from paying tax on the amount withdrawn. Whatever amount you withdraw must be paid back into your RRSP over the next 15 years.
Save on accessibility upgrades
If you’re at least 65 years old or qualify as disabled, or if you support someone who meets one of those criteria, the Home Accessibility Tax Credit can help recover up to $10,000 from the cost of any work to improve and enhance the safety and accessibility of your home. Similarly, the Medical Expenses Tax Credit can offset the cost of work to equip your home for family members with mobility issues and other conditions. Check the Canada Revenue Agency website to see which conditions qualify for tax relief.
Home office deductions
Do you work from home or operate a business out of your home? If so, you may be eligible for business-use-of-home deductions. To qualify, your home must be your principal place of business, or have an area where you regularly meet clients, customers, and patients. If eligible, you can deduct a percentage of your costs for heating, electricity, utilities, insurance, even cleaning supplies. You can also deduct portions of your property tax and interest on mortgage payments, as well as any the cost of maintenance and repairs to the eligible space.
Rental unit deductions
If you rent part of your home and report the income on your tax return, you can deduct a portion of the cost of many of the same things you would with a home business, such as maintenance and repairs, mortgage interest, property tax, insurance, even the cost of advertising your rental unit to prospective tenants.
Principal residence exemption
Easily the most valuable tax advantage of home ownership is the exemption from capital gains tax when selling your ‘principal residence.’ This exemption does not extend to investment properties but does apply (with certain exceptions) if you live in a home that contains a rental unit. You must designate a property as your principal residence on your tax return in order to qualify for the exemption.
Even seasonal homes such as cottages, trailers and houseboats can be designated as a principal residence provided you, a spouse, or your child lived there in the relevant tax year (even part-time), and the place isn’t used to generate rental income. Taxpayers may claim the principal residence exemption for one property per tax year.
The exemption only applies to the time you’ve lived in your home, meaning you’ll be taxed on gains in any years you owned the property but didn’t live there. The amount of eligible land is limited to half a hectare, but exceptions can be made for larger properties if the homeowner is able to demonstrate that more space is necessary to use and enjoy the home.
Before making any decision to buy or renovate a home and take advantage of potential tax benefits, be sure to confirm your eligibility with a tax professional or the Canada Revenue Agency.