So the Canadian Government Have Provided Tax Help to First Time Consumers – Is It Worth It?
// January 8th, 2010 // Real Estate
First Time Home-Buyers Tax Credit was one of the governments action incentives to help with the property depression. Even so, in comparison to the first time home-buyers tax credit granted by the US government, the Canadian one seems like a joke. But who’s laughing?
Before we can judge, we need to analyze the two. The Canadian Federal government are proposing a Tax Credit based on a $5,000 deductible. Using the deductible and multiplying it by the lowest income tax rate, for a real estate owner this will come to less than $800 net if you haven’t owned a property within the past four years.
In the USA the real estate value is the key to this incentive as up to 10% of its value is used to find out the tax credit. There is one important difference – this sum is not taken away from the tax base (like ours), but deducted from the customer’s income tax owing. When the tax owing doesn’t top the maximum incentive then the new property owner can look forward to the money being cashed back to them. If a US citizen wants to take advantage of this tax credit then they can’t have owned a house in the last 3 years.
While the Canadian real estate market recuperation is credited by professionals generally to the Bank of Canada interest rate cut, the (still quite shaky) recovery of the American market was indeed fueled by their enormous tax credit. The American plan cut the pressure of finding a down payment for a property and paved the way for first time buyers to get on the property ladder. Although the answer is likely more complicated, wouldn’t you think that Canada would look at the benefits of the US tax credits a little closer?
Firstly, there is a question of necessity. The force of the Canadian recession vs the US recession on our specific property markets has been radically different. While dropping prices, lost jobs and a flood of inventory drove many Americans right into short sales or foreclosures, the Canadian market bounced back within a few months, with any impact hitting investors and real estate agents more than ordinary homeowners.
The next question is of a fiscal sort. Billions of dollars in lost tax revenue doesn’t support the already struggling budget deficit when 1.5 million taxpayers are claiming this tax incentive.
To see the rest, please follow our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.
