Do the First Time Home Consumers Have It All Sewn Up With the Canadian Tax Credit Relief?
First Time Home-Buyers Tax Credit was one of the governments action promotions to help with the real estate depression. In comparison to the USA tax incentive plan, the Canadian scheme seems to come a meagre second. But does anyone find it remotely amusing?
First, let’s analyze the two tax credits. The Canadian First-Time Homebuyer’s Tax Plan, proposed by the Federal government, is 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 amount to less than $800 net if you haven’t owned a property within the last four years.
On the other hand, the American tax credit can be as big as 10% of the property’s value, to a maximum of $8,000. There is one meaningful difference – this sum is not removed from the tax base (like ours), but deducted from the customer’s income tax owing. 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 home in the previous 3 years.
The Canadian and US real estate 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. This greatly reduced the restricting pressure of a down payment and thus put a lot of purchasing power into the hands of the first time home buyers. The question of whether the Canadian economic action plan shouldn’t take the tax credit more seriously comes normally, but the answer is more involved.
What Canadians should ask themselves, is “do we need it”? There has been a entirely different consequence when you examine the recession in both Canada and the USA. Lots of short sales and foreclosures have been observed in the US which flooded the market, although in Canada the hardest hit were real estate agents and investors due to the quick rebound.
The next question is of a fiscal type. Billions of dollars in lost tax revenue doesn’t support the already struggling budget shortage when 1.5 million taxpayers are claiming this tax credit.
To study the rest, please follow our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.