The original post was made early on the morning of the budget. . .obviously a bit late to protest. Have changed the title and left parts of it as it explains how it effects real estate. Some details of the budget at the end of this article.
Yesterday, Premier McGuinty combined the five percent federal Goods and Services Tax (GST) with the eight per cent Provincial Sales Tax (PST), to create a single Harmonized Sales Tax (HST).
On the surface, this may seem like not a big deal, but the key point to remember is that these two taxes are not levied in the same way, so many things that are currently only subject to one tax, would, under this scheme, start paying both taxes.
Unfortunately, home buyers and sellers would be one of the hardest hit groups under this proposal, which is why the real estate industry is strongly opposed to it.
Currently, the purchase price of re-sale homes is not subject to PST or GST (unlike new housing, which is subject to GST), and it is not expected that the proposed HST would change this, but it would add significant tax to the many services that home buyers and sellers rely on, such as moving costs, legal fees, home inspection fees, mortgage insurance premiums, title insurance, and Realtor commissions.
For example, for an average Peterborough home priced at approximately $220,000, a HST could add over $1,000 in upfront taxes on closing costs. This is a substantial amount to home buyers at a time when they can least afford it.
The prospects are even worse for new housing, which is currently subject to a reduced GST of about 3.2 per cent, instead of the usual 5 per cent, on the purchase price.
The housing industry is critical to the economy. Hundreds of thousands of jobs depend on it, both directly and indirectly. For example, a recent study conducted for the Canadian Real Estate Association, found that every re-sale housing transaction results in over $33,000 in spin-off spending on things like renovations, appliances and furniture. By adding significant costs to home buying, a HST risks this type of spending, and runs completely contrary to the Province’s efforts on the economy.
March Budget will take effect 1 July 2010
New homes under $400,000.00 will not pay both taxes. . .sounds better than it is. . .you pay the whole amount of 13% and then are reimbursed 75% of the provincial portion up to $500,000. Still more than now. Now we pay 3.5% (reduced GST) Under the new system home buyers would pay 7% (5% GST and 2%PST)
To help people and families adjust to the new single sales tax, the government would provide permanent tax relief and direct payments:
* 93 per cent of Ontario taxpayers would pay less personal income tax
* Eligible families with an income below $160,000 would receive three payments from the provincial government, totaling $1,000
* Eligible individuals with an income of less than $80,000 would receive three payments totaling $300
o The first payment would arrive in June 2010, the second in December 2010 and the third in June 2011
* The provincial government would also provide:
o Permanent tax relief for people with low and middle incomes through one of the most generous refundable sales tax credits in Canada. This new credit would provide up to $260 per year for each adult and child
o A 16.5 per cent cut in the tax rate on the first $36,848 of taxable income earned by all Ontarians.
The tax, which is being implemented with the assistance of the federal government, will include items not previously covered by the sales tax, such as home heating costs, hydro, water, gasoline, postage, fast food, haircuts, and internet services as well as all the real estate related services mentioned above (moving costs, legal fees, home inspection fees, mortgage insurance premiums, title insurance, and Realtor commissions). Some exemptions include books and childrens clothing and shoes, diapers, and car seats.
Jill Fyffe
Sutton Group All Pro
705-742-7382
Thursday, March 26, 2009
Monday, March 23, 2009
Home Owner Grants
The following programs apply to every homeowner, not just new or first time homeowners.
**NEW***
1. Home Renovation Tax Credit will provide a temporary 15% income tax credit for eligible home renovation expenditures for work performed, or goods acquired, after 27 Jan 2009 taxation year to 1 February 2010. The credit must be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1000, but not more than $10,000. This will provide up to $1350. in tax relief. See www.cra-arc.gc.ca and click on “Home Buyers Plan” to see all the eligible renovations
2.. Grants for Eco friendly upgrades. This program provided home and property owners with grants up to $5,000. to offset the cost of making energy efficient improvements. Grants apply to a variety of measures that reduce energy consumption. Anything from increasing insulation, replacing windows to installing a new furnace. Most service providers have all the details of this grant and can assist you in what is eligible and what is not. Items have a specific credit amount not a percentage of the total cost. i.e. a new window may have a credit of $50.00, regardless if the replacement window cost $150. or $350 dollars.
If you need more information on any of these programs just give me a call.
Jill Fyffe
Sutton Group All Pro
**NEW***
1. Home Renovation Tax Credit will provide a temporary 15% income tax credit for eligible home renovation expenditures for work performed, or goods acquired, after 27 Jan 2009 taxation year to 1 February 2010. The credit must be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1000, but not more than $10,000. This will provide up to $1350. in tax relief. See www.cra-arc.gc.ca and click on “Home Buyers Plan” to see all the eligible renovations
2.. Grants for Eco friendly upgrades. This program provided home and property owners with grants up to $5,000. to offset the cost of making energy efficient improvements. Grants apply to a variety of measures that reduce energy consumption. Anything from increasing insulation, replacing windows to installing a new furnace. Most service providers have all the details of this grant and can assist you in what is eligible and what is not. Items have a specific credit amount not a percentage of the total cost. i.e. a new window may have a credit of $50.00, regardless if the replacement window cost $150. or $350 dollars.
If you need more information on any of these programs just give me a call.
Jill Fyffe
Sutton Group All Pro
First Time Home Buyer Grants
As of March 2009 there are 3 programs that are available to first time home buyers.
1. The RRSP withdrawal limit has been raised form 20,000 to $25,000. The repayment rules pretty much stay the same. The money withdrawn must be paid back over a period of not more than 15 years. Repayment starts the second year following the year of withdrawals. If you pay back less than the scheduled annual payment, then the amount that isn't repaid must be reported as income on your tax return for that year. i.e. Oct 09 you withdraw 24,000. from your RRSP to finance the purchase of a home. Your 1st annual payment of $1,600.00 (24 divided by 15 years) is due Dec 31, 2011.
2. In the Budget of 2009, a new non-refundable tax credit was introduced for 1st time home buyers. To qualify for this credit you must purchase a qualifying home and neither the home buyer or their spouse or common in law partner can have owned a home in the preceding four years.
3. First time home buyers may be eligible for a refund of all or part of the Land Transfer Tax. The maximum refund amount is $2000. Your lawyer will claim it on your behalf at the time of title registration. To qualify you must be 18 years old, buying a principal residence to live in and must not have owned a home or interest in a home anywhere in the world. In addition your spouse must never have had interest in a home while they were your spouse.
If you need more information on any of these programs please give me a call.
Jill Fyffe
Sutton Group All Pro Realty Inc
748-5600 ext # 1019
1. The RRSP withdrawal limit has been raised form 20,000 to $25,000. The repayment rules pretty much stay the same. The money withdrawn must be paid back over a period of not more than 15 years. Repayment starts the second year following the year of withdrawals. If you pay back less than the scheduled annual payment, then the amount that isn't repaid must be reported as income on your tax return for that year. i.e. Oct 09 you withdraw 24,000. from your RRSP to finance the purchase of a home. Your 1st annual payment of $1,600.00 (24 divided by 15 years) is due Dec 31, 2011.
2. In the Budget of 2009, a new non-refundable tax credit was introduced for 1st time home buyers. To qualify for this credit you must purchase a qualifying home and neither the home buyer or their spouse or common in law partner can have owned a home in the preceding four years.
3. First time home buyers may be eligible for a refund of all or part of the Land Transfer Tax. The maximum refund amount is $2000. Your lawyer will claim it on your behalf at the time of title registration. To qualify you must be 18 years old, buying a principal residence to live in and must not have owned a home or interest in a home anywhere in the world. In addition your spouse must never have had interest in a home while they were your spouse.
If you need more information on any of these programs please give me a call.
Jill Fyffe
Sutton Group All Pro Realty Inc
748-5600 ext # 1019
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