First Time Home-Buyers Tax Credit in Canada: A Farce or Something Worth Securing?
// November 6th, 2009 // Real Estate
First Time Home-Buyers Tax Credit was one of the governments action plans to help with the housing depression. But this incentive doesn’t seem to be a blessing opposed to the USA tax plan, as well as coming off as a bit of a joke. Nevertheless does anyone find it remotely amusing?
To start, let’s analyze the two tax credits. The Canadian First-Time Homebuyer’s Tax Plan, offered by the Federal government, is based on a $5,000 deductible. If you want to buy property in Canada and haven’t owned housing in the last four years, then this deductible is multiplied by 15% – total net of $750.
On the other hand, the American tax credit can be as high as 10% of the real estate’s value, to a maximum of $8,000. In Canada the amount is deducted from the tax base but in the USA it is deducted from income tax owing of the consumer. In cases where the income tax owing doesn’t go over $8,000, the comparable sum is cashed back to the customer. But in Canada a person can’t have owned a house for the 4 years preceding, in the US this is only 3.
The American housing market has entered a shaky but definitive recovery due to these gigantic tax credits, but in Canada the recovery of the property market is believed to be due to the interest rate cuts. The American plan reduced the pressure of finding a down payment for a property and paved the way for first time buyers to get on the housing ladder. Seeing the benefit of the US incentive, the first thought is shouldn’t Canada be looking more intently at these opportunities?
What Canadians must ask themselves, is “do we want it”? Although both Canada and the US have both been in recession there has been a marked contrast in the result of it. The Canadian market bounced back within a few months with the main losers being real estate investors and estate agents; but the Americans have seen the decline hit home owners with a lot of short sales and forclosures.
The second question is of a fiscal sort. With about 1.5 million taxpayers claiming the incentive, the US federal government has been deprived of around $10 billion in tax revenues so far, adding more weight to the already tremendous budget deficit.
To study the rest, please look at our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.
