One of the most featured incentives in the governments plan to help with the property depression was the First Time Home-Buyers Tax Credit. In contrast to the USA tax incentive plan, the Canadian plan seems to come a poor second. But does anyone find it remotely funny?
Let’s commence by investigating both the tax credits on the table. The Canadian Federal government are offering a Tax Incentive proposed on a $5,000 deductible. Using the deductible and multiplying it by the lowest income tax rate, for a housing owner this will come to less than $800 net if you haven’t owned a property within the previous four years.
Although, the USA are giving up to $8,000 based on the real estate value itself. There is one significant difference – this sum is not deducted from the tax base (like ours), but deducted from the purchaser’s income tax owing. When the tax owing doesn’t go over 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 property in the preceding 3 years.
The Canadian and US property market recovery is down to very different things; in the US its down to these massive tax credits whilst in Canada it is believed to be down to interest rate cuts. First time buyers in the US are now in a position of power when acquiring real estate due to cut in pressure to find large down payments. Seeing the benefit of the US plan, the first thought is shouldn’t Canada be looking more intently at these options?
So is it essential to have these tax credits? The shock of the Canadian recession vs the US recession on our particular property markets has been radically different. While falling prices, lost jobs and a surge of inventory drove many Americans right into short sales or foreclosures, the Canadian market made a comeback within a few months, with any impact hitting investors and real estate agents more than ordinary homeowners.
The next question is of a fiscal kind. Billions of dollars in lost tax revenue doesn’t aid the already struggling budget shortage when 1.5 million taxpayers are claiming this tax credit.
To read the rest, please follow our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.