Among all the government actions taken in Canada to improve last year’s real estate decline, the tax credit was one of those most highlighted. Unfortunately this incentive doesn’t seem to be a blessing opposed to the USA tax incentive, as well as coming off as a bit of a joke. But who’s finding it amusing?
To begin with, let’s compare the two tax credits. Founded on a $5,000 deductible is the Tax Incentive presented by Canada’s Federal government. If you would like 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.
Whereas, the USA are offering up to $8,000 based on the property value itself. In the US the amount is deducted from the buyer’s income tax (owing) whereby in Canada it’s deducted from the tax base. In cases where the income tax owing doesn’t go over $8,000, the same sum is cashed back to the homeowner. If a US citizen wants to take advantage of this tax incentive then they can’t have owned a home in the last 3 years.
The American housing market has entered a shaky but clear recovery due to these gigantic tax credits, while in Canada the recovery of the property market is believed to be due to the interest rate cuts. First time buyers in the US are now in a position of power when acquiring real estate due to cut in pressure to find large down payments. The question of whether the Canadian economic action plan shouldn’t take the tax credit more sincerely comes simply, but the answer is more complicated.
What Canadians should ask themselves, is “do we need it”? There has been a completely different result when you compare the recession in both Canada and the USA. Many short sales and foreclosures have been observed in the US which inundated the market, while in Canada the hardest hit were real estate agents and investors due to the quick rebound.
Next we need to examine public funds and debts. With about 1.5 million taxpayers claiming the credit, the US federal government has lost around $10 billion in tax revenues so far, adding more issues to the already tremendous budget deficit.
To read the rest, please read our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.
