Many taxpayers end up overpaying their taxes simply because they overlook common deductions and credits they are entitled to. As a homeowner, there are several tax breaks that you may be eligible to claim. Before you submit your next tax return, review the following list of frequently overlooked home tax deductions and credits available to Canadian taxpayers:
1. First-Time Home Buyer’s Tax Credit
If you are purchasing a home for the first time, you can claim a non-refundable tax credit of up to $750. This credit is based on a percentage of $5,000 and can be claimed by you or your spouse or common-law partner. This credit can provide significant relief for new home buyers.
2. GST/HST New Housing Rebate
If you buy a new home as your principal residence and its cost is less than $450,000, you may be eligible for the GST/HST new housing rebate. Ontario and British Columbia residents can also claim the provincial portion of the HST if they buy, build, or make major renovations to their principal residence. There are also specific deductions available for homes built by the owner and for residential rental properties.
3. Home Buyer’s Plan
The Home Buyer’s Plan allows you to withdraw up to $25,000 from your Registered Retirement Savings Plan (RRSP) to assist with the purchase or construction of a home. To utilize this plan, complete the T1036 tax form. Be sure to understand the specific conditions and repayment requirements associated with this plan.
4. Medical Expenses Tax Credit
For individuals with mobility impairments, renovation expenses to make a home more accessible can be claimed under medical expenses deductions. The government provides a detailed list of eligible medical expenses and those that cannot be claimed, so review this information to ensure you are making the most of available deductions.
5. Moving Expenses
If you move within Canada, certain moving expenses may be deductible. To qualify, you must be employed and your new home must be at least 40 kilometers closer to your workplace. Moving expenses are also deductible if you are starting a business or relocating to start your first job. Deductible expenses include hiring movers, breaking a lease, renting a van, furniture storage, travel meals and lodging, and legal fees and real estate commissions. If your deductions exceed your earned income, they can be carried forward for one year.
6. Work-from-Home Expenses
If you use part of your home for business purposes, such as a home office, you can claim a portion of related expenses. For homeowners, this includes a portion of mortgage interest, property taxes, and capital cost allowance. Renters can claim a portion of monthly rent. Additional deductible expenses include utilities, insurance, and home maintenance specific to the business area of your home. Note that these deductions cannot create a loss against other income sources. For detailed calculations, refer to CRA forms T2124 and T2032, which include a guide on “Calculation of Business-Use-of-Home Expenses.”
7. Rental Income
If you rent out a property, report the rental income using the T776 tax form. You can also claim allowable expenses such as advertising, insurance, and interest on borrowed funds used to buy or improve the rental property.
8. Childcare Tax Credit
In most cases, childcare expenses must be claimed by the parent with the lower net income. If parents are separated and share custody, each parent may claim a portion of the childcare costs. In cases where a medical doctor certifies that the lower-income spouse cannot care for the child due to physical or mental health issues, the higher-income spouse may claim the costs. Eligible childcare expenses include daycare centers, day nursery schools, some individual caregivers, day camps, and educational institutions with a childcare component.
9. Provincial Credits
Several provinces offer additional home tax credits. Manitoba homeowners can benefit from the Education Property Tax Credit and the School Tax Credit. In Ontario, homeowners can apply for the Ontario Property Tax Credit and the Senior Homeowner’s Property Tax Credit.
For more detailed information and guidance, consult the CRA website: http://www.cra-arc.gc.ca. By taking advantage of these often-overlooked tax deductions and credits, you can maximize your tax benefits and potentially reduce your tax liability.
For more personalized advice, contact Jackie Magas at 905-630-0009.
