Is Canada’s First Time Home-Buyers Tax Credit Worth the Stationery It Is Written on?
Tuesday, November 17th, 2009 Subscribe To Our Feed
Among all the government actions taken in Canada to ease last year’s real estate slump, the tax credit was one of those most accentuated. Although, compared to the first time home-buyers tax credit granted by the US government, the Canadian one seems like a joke. Nevertheless does anyone find it remotely funny?
To start, let’s analyze the two tax credits. Proposed on a $5,000 deductible is the Tax Incentive presented by Canada’s Federal government. Multiplied by the lowest income tax rate (15%), it tots up to a net $750 credit for anybody who wants 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 plan as up to 10% of its value is used to work out the tax credit. In Canada the amount is taken away from the tax base though in the USA it is deducted from income tax owing of the purchaser. In cases where the income tax owing doesn’t exceed $8,000, the comparable sum is cashed back to the customer. This tax credit is open to those who haven’t owned property in the three years prior to taking advantage of the tax plan.
The Canadian and US housing market recovery is down to very different things; in the US its down to these enormous tax incentives 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 buying real estate due to reduction in pressure to find large down payments. Seeing the benefit of the US incentive, the first thought is shouldn’t Canada be looking more carefully at these ideas?
Firstly, there is a question of requirement. The impact of the Canadian recession vs the US recession on our respective housing markets has been radically different. The Canadian market rebounded within a few months with the main losers being property investors and estate agents; but the Americans have seen the slump hit home owners with a lot of short sales and forclosures.
The second question is of a fiscal sort. Billions of dollars in lost tax revenue doesn’t aid the already massive budget deficit when 1.5 million taxpayers are claiming this tax plan.
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.
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