March 20, 2024 | Homeowners

Essential Tax Tips Before You File

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In the realm of real estate, tax season can be a critical time for homeowners to maximize their benefits and ensure they are taking advantage of all available credits and deductions. Whether you’re a seasoned homeowner or a first-time buyer, understanding the nuances of tax filing in relation to your property can lead to significant savings. Here are some key tips to consider when filing your taxes:

1. Organize Your Documents: Before diving into your tax filing, ensure you have all relevant documents organized. This includes receipts for home improvements, property tax statements, mortgage interest statements, and any other paperwork related to your real estate investments. Being organized can help you claim all eligible deductions and credits accurately.
2. Leverage First-Time Home Buyer Tax Credit: The First-Time Home Buyer Tax Credit can provide valuable savings for first-time homebuyers. This credit allows you to claim up to a certain amount for the purchase of your first home, helping to reduce the overall tax burden. Be sure to research the specific criteria and guidelines to see if you qualify for this credit.
3. Utilize RRSP and TFSA: Consider leveraging your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) to optimize your tax benefits. Contributions to these accounts can result in tax deductions or tax-free growth, which can be beneficial in the long run. Additionally, utilizing these accounts for real estate investments can further enhance your financial portfolio.
4. Revised Underused Housing Tax: This targets foreign investors leaving Canadian properties vacant, inadvertently burdening many Canadian property owners with compliance issues despite having no tax liability. In response to this, the government has made adjustments including extending the filing deadline for 2022 to April 30, 2024. Furthermore, Canadian corporations, partnerships, trustees, and owners of entire condo apartment buildings are now exempt from filing for UHT starting from 2023.
5. First Home Saving Account: In 2023, the government introduced the First Home Saving Account (FHSA) to aid first-time home buyers in saving for their own homes. Canadians eligible for the FHSA have a lifetime contribution limit of $40,000, with an annual limit of $8,000. Contributions to the FHSA can grow tax-free, akin to a Tax-Free Savings Account (TFSA), and are tax-deductible, similar to a Registered Retirement Savings Plan (RRSP), with the distinction that only the contribution made in the calendar year can be deducted from income. Additionally, one can carry forward one year of contribution limit, allowing flexibility in saving for a home purchase over multiple years
6. GST/HST on Purpose-Built Residential Rebate: In September 2023, the Canadian Prime Minister announced a significant change regarding the GST rebate for new builds, allowing builders of properties with four units or more to claim back 100% of the GST paid, aiming to reduce building costs. Moving forward to November 1, 2023, the Doug Ford government in Ontario introduced a transformative policy eliminating the full 8% provincial portion of the HST on qualifying new purpose-built rental housing to encourage more rental home construction in the province. To be eligible for these rebates, projects need to meet specific criteria such as starting construction after September 14, 2023, having at least 90% of units designated for long-term rental, and excluding single units, duplexes, triplexes, and housing co-ops from the rebate.

By implementing these tips and staying informed about the various tax credits and deductions available to real estate clients, you can navigate tax season with confidence and potentially unlock significant savings. Remember to consult with a tax professional or financial advisor for personalized guidance tailored to your specific situation.