Do the First Time Property Buyers Have It All Sewn Up With the Canadian Tax Credit Incentives?
First Time Home-Buyers Tax Credit was one of the governments action plans to help with the property depression. However, compared to the first time home-buyers tax credit given by the US government, the Canadian one seems like a joke. So do we find it just one large laugh?
Let’s start by analyzing both the tax credits on the table. Based on a $5,000 deductible is the Tax Plan presented by Canada’s Federal government. Multiplied by the lowest income tax rate (15%), it adds up to a net $750 credit for everyone who would like to buy a housing unit in Canada and didn’t own property during the last four years.
In the USA the property value is the key to this credit as up to 10% of its value is used to work out the tax credit. In Canada the amount is removed from the tax base though in the USA it is deducted from income tax owing of the buyer. When the tax owing doesn’t exceed the maximum credit 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 incentive then they can’t have owned a house in the previous 3 years.
The American property market has entered a shaky but definite recovery due to these enormous tax credits, while in Canada the recovery of the property market is believed to be due to the interest rate cuts. This actively reduced the limiting pressure of a down payment and thus put a lot of purchasing power into the hands of the first time house buyers. Seeing the benefit of the US incentive, the first thought is shouldn’t Canada be looking more intently at these options?
Firstly, there is a question of requirement. The shock of the Canadian recession vs the US recession on our particular property markets has been radically different. Many short sales and foreclosures have been seen in the US which inundated the market, although in Canada the hardest hit were real estate agents and investors due to the quick rebound.
Looking at the fiscal circumstances we also see a difference. With approximately 1.5 million taxpayers claiming the credit, 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 read our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.