Is the Canadian First Time Home-Buyers Tax Credit Helping Stimulate the Housing Market?
One of the most emphasized incentives in the governments plan to help with the housing slump was the First Time Home-Buyers Tax Credit. In comparison to the USA tax incentive plan, the Canadian tax credit seems to come a poor second. So do we find it just one big laugh?
Let’s start by looking at both the tax credits on offer. The Canadian Federal government are offering a Tax Credit proposed on a $5,000 deductible. If you want to purchase property in Canada and haven’t owned housing in the last four years, then this deductible is multiplied by 15% - total net of $750.
On the other hand, the American tax credit can be as high as 10% of the real estate’s value, to a maximum of $8,000. In the US the amount is removed from the buyer’s income tax (owing) whereby in Canada it’s deducted from the tax base. When the tax owing doesn’t go over the maximum plan then the new property buyer can look forward to the money being cashed back to them. While in Canada a person can’t have owned a property for the 4 years before, in the US this is only 3.
While the Canadian real estate market bounce back is credited by experts generally 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. The American incentive reduced the pressure of finding a down payment for a property and paved the way for first time buyers to get on the housing ladder. Seeing the benefit of the US tax credit, the first thought is shouldn’t Canada be looking more carefully at these options?
What Canadians should ask themselves, is “do we require it”? The force of the Canadian recession vs the US recession on our specific housing markets has been radically different. Many short sales and foreclosures have been seen in the US which inundated the market, although in Canada the hardest hit were real estate agents and investors due to the quick rebound.
Looking at the fiscal situation we also see a variance. In the US there is a enormous budget loss and with over a million taxpayers claiming this aid it impacts on lost tax revenue.
To study the rest, please read our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.
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