So the Canadian Government Have Given Tax Incentives to First Time Purchasers - Is It Worth It? November 23, 2009
Posted by janey in : general finance , trackbackOne of the most emphasized incentives in the governments plan to help with the real estate decline was the First Time Home-Buyers Tax Credit. Although, compared to the first time home-buyers tax credit granted by the US government, the Canadian one seems like a joke. So do we find it just one massive joke?
To begin with, let’s analyze the two tax credits. Based on a $5,000 deductible is the Tax Incentive proposed by Canada’s Federal government. Multiplied by the lowest income tax rate (15%), it calculates up to a net $750 credit for everyone who intends to buy a housing unit in Canada and didn’t own property during the last four years.
On the other hand, the American tax plan can be as great as 10% of the real estate’s value, to a maximum of $8,000. In Canada the amount is taken away from the tax base though in the USA it is deducted from income tax owing of the buyer. In cases where the income tax owing doesn’t go over $8,000, the same sum is cashed back to the homeowner. But in Canada a person can’t have owned a home for the 4 years earlier, in the US this is only 3.
While the Canadian real estate market recuperation is credited by specialists mainly to the Bank of Canada interest rate cut, the (still quite shaky) recovery of the American market was indeed fueled by their gigantic tax credit. This strongly reduced the confining pressure of a down payment and thus put a lot of purchasing power into the hands of the first time house buyers. Although the answer is possibly more involved, wouldn’t you think that Canada would look at the benefits of the US tax credits a little closer?
Firstly, there is a question of requirement. There has been a totally different result when you examine the recession in both Canada and the USA. While falling prices, lost jobs and a surge of inventory drove many Americans right into short sales or foreclosures, the Canadian market bounced back within a few months, with any impact hitting investors and real estate agents more than usual homeowners.
The further question is of a fiscal kind. In the US there is a enormous budget loss and with over a million taxpayers claiming this credit it impacts on lost tax revenue.
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.
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