Archive for the ‘Interest Rate’ Category

Home Related Tax Deduction Tips from the HSH Team

Tuesday, February 26th, 2013

Unfortunately that dreadful time of the year is upon us…Tax season.

To help burden that tax pain we have a few home related tax deduction tips that can help you save some extra moola and help keep the hands out of your pocket this season!

 

1) Sell, make a profit, and don’t pay a nickel in taxes.
Most people are already aware that any capital gain on the sale of your principal residence is considered tax-free profit. But in order to not step out of bounds with the Canada Revenue Agency make sure you and your family unit only designate one property as a principal residence.

A family unit, for tax purposes, consists of you, your spouse (or common-law partner) and any unmarried children under the age of 18.

Ordinarily you have to inhabit a place regularly to call it your principle residence, although there are options to designate a recreational property as a primary residence. This is best done when there’s been little appreciation on your city-home, but a spike in value on your cottage. But talk to a tax specialist to confirm the best way of going about this.

2) Get a 15-year tax-free loan from yourself.
The Home Buyer’s Plan allows you to borrow, tax-free, up to $25,000 from your RRSP for the purpose of buying or building a home. The great news is that each half of a couple can withdraw up to $25,000, tax-free, from their own RRSPs. But you must be first-time homebuyers. And you cannot have owned or occupied your own home up to four years before the year you made the withdrawal.

You will be required to pay 1/15th of the loan each year for the next 15 years. But there will be no interest charges and no taxes incurred.

3) Cash in on being a first-time homebuyer.
In 2009 the federal government introduced a new tax credit for first-time home buyers:
o If you buy a home and you and your spouse haven’t owned a home in the last five years then you are entitled to a tax credit.
o The maximum credit is worth $750 and may be claimed by either spouse, or both, as long as the total doesn’t exceed $750.

4) Live the dream and work from home.
By creating a home-based business—even a part-time business—you are entitled to claim a deduction for a portion of home costs. This includes: mortgage interest, property taxes, utilities, repairs, landscaping and maintenance costs.

Just remember that you have to have a reasonable expectation of profit in order for the business to be legitimate, according to the tax man.

5) Make your home pay you.
Another way to claim a deduction for a portion of home costs is to rent out a room or part of your residence to a tenant.

Your property is still considered your principal residence (even it’s used to earn income) as long as the revenue-generating portion of your home is not the main use of your home.

Also, don’t make any structural changes to your home or claim any capital cost allowance deductions.

6) Move to get a bigger tax deduction.
If you move 40 kilometres closer to work or school and you could be eligible for some serious deductions.

That’s because almost every expense associated with moving can be deducted. This includes the cost of selling your old home and purchasing your new home, including realtor commissions, legal fees, even your mortgage penalties are dollar-for-dollar tax deductible.

You can also deduct all travelling expenses, such as fuel and maintenance for your car as well as transportation and storage costs, including insurance, for your household effects. This includes up to 15 days of meals and temporary accommodation, while travelling to the new home, as well as the cost of revising legal documents, such as driver’s license or utility hook-ups.

But be forewarned: a teammate on my brother’s hockey team, who is also a tax lawyer, confessed that the deductions can be so lucrative that people who claim moving expenses will often get red flagged by the CRA. Of course, if everything is above board, a little scrutiny may be worth it for a $5,000 or more tax deduction.

7) Renovate for medical reasons.
If you have mobility issues and you require renovations you may be able to claim this expense. Just remember that medical expense reimbursements need to fall within a 12-month period ending in the current tax year.

 

Source: http://www.moneysense.ca/2013/02/19/how-your-home-can-save-you-at-tax-time/

Government of Canada Makes a Few Changes & A pre-approval will hold all-time low rates for up to 120 days.

Wednesday, February 17th, 2010

The Short Version

The Federal Government has taken some steps to protect consumers buying homes now so they
will be able to make payments when rates go back to their long term average of about 6%.

Highlights – Not Much Has Changed:
1. All borrowers will qualify at the 5 year rate – from 3.79% to 4.09% – which is where we
have been qualifying buyers for the last 4 years anyway.
2. People refinancing can only withdraw a maximum of 90% of the appraised value of their
home. Most of our refi’s are at 80% so this does not affect most of our clients.
3. 20% down is now needed for investment properties that are not owner-occupied. Most
clients put 20% down anyway so this does not change much for investors either.
4. Amortization period and down payment remain unchanged at 35 years max and 5% down

The Detailed Version – Government of Canada Takes Action

“Canada’s housing market is healthy, stable and supported by our country’s solid economic
fundamentals,” said Minister Flaherty. “Our Government is acting to help prevent Canadian
households from getting overextended, and acting to help prevent lenders from facilitating it.”
The Government will therefore adjust the rules for government-backed insured mortgages
as follows, and are effective April 19, 2010:

1. Require that all borrowers meet the standards for a five-year fixed rate mortgage even if
they choose a mortgage with a lower interest rate and shorter term. This initiative will
help Canadians prepare for higher interest rates in the future.
2. Lower the maximum amount Canadians can withdraw in refinancing their mortgages to
90 per cent from 95 per cent of the value of their homes. This will help ensure home
ownership is a more effective way to save.
3. Require a minimum down payment of 20 per cent for government-backed mortgage
insurance on non-owner-occupied properties purchased for speculation.

Mark noted the above in the Calgary Sun a few weeks ago. See attached.
Rates
• 5-year, fixed rates now range between 3.79% and 4.09% – the lowest in about 70 years.
• Variable rates are Prime-0.35%, or 2.25% – .35% = 1.90% AND you can lock-in at best
bank rates before rates go up. Banks lock you in at Posted – 1% = 5.65% -1% = 4.65%!

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