Canada Introduces Tax Credit For First Time Homebuyers

by Mike Godfrey, Tax-News.com, Washington

06 February 2009

Jean-Pierre Blackburn, Canada's Minister of National Revenue and Minister John Baird, Canada's Minister of Infrastructure, Transportation and Communities, have highlighted key initiatives from the 2009 budget that will benefit first-time home buyers.

Canada's 'Economic Action Plan' proposes to support the home construction and real estate industries with a First-Time Home Buyers' tax credit that will provide up to CAD750 in tax relief, and an increase in the amount that they can withdraw from a Registered Retirement Savings Plan (RRSP) to purchase a home from CAD20,000 to CAD25,000.

“Buying a home for the first time is a milestone event for many Canadians and is often the single largest purchase that one can make,” said Minister Blackburn. “The proposals announced in Canada's Economic Action Plan will not just help first home buyers in the purchase of their first home. It will also help stimulate the housing sector through increase in demand for labour, building materials and other goods.”

“Young families and others looking to buy a home for the first time deserve a break, and our government has delivered,” said Minister Baird. “When people are buying homes, trades people are being put to work, businesses that make and sell building products get a boost, and the real estate industry continues to employ people too.”

The new tax credit has also found support within Canada's real estate industry.

“The federal government has found a way to introduce economic stimulus and housing initiatives for specific groups, and for Canadians who want to buy their first home,” said Calvin Lindberg, President of the Canadian Real Estate Association (CREA).

"This is great news for first-time homebuyers who comprise a sizable portion of our customer base. And with the new home market experiencing a slowdown in recent months,” said Robert Greenberg, Executive Vice President of Minto Developments Inc, “these types of incentives are certainly welcomed by the housing industry. When you think of how many components go into the building of a new home, a strong housing market is good for the overall economy, not just for builders."

Finance Minister Jim Flaherty also announced a temporary Home Renovation Tax Credit (HRTC) in the 2009 budget with the aim of providing tax relief while encouraging broad-based economic activity. Individuals will be able to claim 15% of individual expenditures in excess of CAD1,000 but not more than CAD10,000.

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