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Keep tax incentives in mind when making plans that impact property
The 2015 federal budget wasn’t very enticing, but it did offer a couple of tax and saving incentives for those considering estate planning using real estate or looking to stay in their home a bit longer. Here are a few budget highlights from a real estate perspective:
–> Anyone 65 or older will benefit from the new Home Accessibility Tax Credit (HATC), explains Don Carson, spokesperson for Canada’s Chartered Professional Accountants. Under this new tax credit, you can retrofit your home, up to a cost of $10,000, and get a 15% tax rebate. “If a walk-in tub costs $5,000, this 15% tax credit will mean the net cost for that modification is $4,250,” says Carson. The credit is also open to caregivers of anyone over 65 and those who already qualify for the disability tax credit. Better still, this tax credit can be claimed in addition to the medical expense credits for the same renovation costs.
–> For those considering donating to their favourite charity you may want to consider signing over the cottage. The budget offered new rules that will reduce the tax you pay on donations of property, explains MoneySense tax columnist Evelyn Jacks. For example, if you donated your cottage worth $100,000 (no cost base) you’d have to pay $25,000 in capital gains tax, under the new rules. A big hit that’s offset by the $46,000 donation credit you’d receive, says Carson. But under the new rules, you wouldn’t have to pay capital gains tax and you’d still receive a donation credit of $46,000, “which can be used to offset other income,” says Carson.
–> Canadians who own a farm or fishery will also benefit from this budget as the capital gains exemption has increased from the current $813,600 to $1 million on the sale of farms and fisheries. Keep in mind, however, that the exemption can only apply to sales after April 20, 2015.
–> Finally, if you own a rental property outside of Canada you’ll be happy to learn that the foreign asset reporting rules will be simplified in the 2015 tax filing year, as long as the asset is worth less than $250,000 (up from the current threshold of $100,000), says Jacks. “Current rules will continue to apply to property valued at $250,000 or more,” says Jacks.
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