The tax implications of renting versus owning a home

You can talk to ten people about renting versus owning a house and get a 50/50 split in responses.

While there are many factors to consider, with arguably the most important one being “will my neighbours be weird?”, one of the biggest factors to assess is how your taxes will be affected – and that can get complicated. Let us break it down for you from a tax perspective.

Tax credits for tenants.

Whether you rent a house, an apartment or a condo, generally speaking, there are no tax credits you can claim for the amount you paid in rent.

But all tax hope is not lost! You can still get some cash back in your pockets if you own and operate a business out of your place (or are required to have a home-office by your employer). How? You can deduct a portion of the rent you paid that was used for work. So, if your monthly rent is $2,000, but you use a quarter of the space for work, then you can deduct $500 per month!

There are also a few province-specific ways tenants can benefit:

  • In Ontario, your monthly rent is a factor into your eligibility for the Ontario Trillium Benefit. Even students in residence may be eligible for this credit.
  • In Manitoba, renters can claim 20% of their rent up to a maximum of $700 in the Manitoba Education Property Tax Credit.
  • In Quebec, there are two tax breaks – one from the Solidarity Tax Credit and another for residents over 65 from the Home Support Services for Seniors.
  • Tax credits for homeowners.

    Being a homeowner is where tax breaks really shine. Not only can you claim the same credits tenants can, but there are more than a few additional perks.

    First Time Home Buyer Tax Credit

    If you’re buying your very first home or if you’re a couple and neither one of you have previously owned a home individually, you can claim the one-time credit of $5,000 thanks to the Home Buyers Tax Credit – that’s more money to put towards your mortgage. Additionally, the CRA has the Home Buyers’ Plan in place to help you purchase your home as well. With this program, you’re able to withdraw from your registered retirement savings plans to buy or build a home.

    Renovations Tax Credits

    Being a homeowner, though, means you no longer can rely on your landlord or property manager for any renovations or repairs that may be needed – so get ready to pull put your toolbelt. However, there’s a little something called the Home Accessibility Tax Credit (HATC). Any renovations that make your home safer or more accessible for seniors or the disabled may qualify for up to $10,000 in expenses. Expenses that qualify for this credit are changes like installing a wheelchair ramp, walk-in tubs, or hand rails.

    Medical Tax Credits for Homes

    Like the HATC, the medical expense tax credit can also be claimed for renovations that make your home easily accessible for anyone with mobility issues. You can claim qualifying medical expenses in excess of 3% of your net income.

    GST/HST Housing Rebate

    If you’re looking for a home, specifically a newly constructed one, you may be able to claim the GST/HST that you paid through the GST/HST new housing rebate. To be eligible, this home must be your principal residence and be less than $450,000.

    Rental Income Tax Credits

    The tax breaks of being a homeowner just keep going if you’re also a landlord. If you have a rental property, you’ll have to add the rent to your income, but you can claim expenses like advertising, insurance and interest on money you borrow to purchase or improve the property.

    Selling Your Home

    Did we also mention that when you sell your home, you don’t have to pay taxes on any gain from the sale because of the principal residence exemption? But take special note here, if the home wasn’t your principal residence for every year that you owned it, or only a part of the home was your principal residence (i.e., you rented out your basement) you may only qualify for partial tax exemption.

    Although renters may not have as many tax breaks as homeowners, it doesn’t mean homeownership is for everyone. If you need any help in figuring out your taxes as it relates to your property, feel free to drop in to your local H&R Block branch and talk to a Tax Expert. Or if you prefer to file from the comfort of your own home, check out our DIY software.

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