Almost all Canadian workers will take home less of their pay cheque in 2011 is the latest news from the Canadian Taxpayers Federation.

If you live in Ontario as I do, we will get walloped with higher federal and provincial taxes and may catch a break in London Ontario where our new mayor is promising a freeze on taxes.

Starting January 1, 2011, Canadians on average will be forking over on average 2% more of their earnings.

Get this quote from a research director at the Federation: “In many cases, it’s the low & middle-income earners who’ll see the steepest increases.”

The main culprit according to the CTF is increases in employment insurance and Canada Pension Plan premiums.

Does anyone in governments at any level have any knowledge on how to stimulate the economy? Taxes are a must in today’s society but stimulating the economy by increasing taxes is an easy head in the sand move.

Why penalize the successful? Why penalize the minimum wage earner, the single mom who works 2 jobs, the small business person who has hocked everything to the bank, employs people, takes risks and for what?

As Canadians, most just plod along, work harder, try to save a bit more and it goes on and on!

Property Assessment in Ontario

 The Government of Ontario has made a number of changes to the property assessment system that

went into effect in the 2009 property tax year. These changes include the introduction of a four-yearassessment update cycle and a phase-in of assessment increases.

I am constantly asked how MPAC comes up with their assesments and why that property is assessed that way and why another is assessed at a different price. Hopefully the following will help.

Currently, the assessed value of properties in Ontario is based on a January 1, 2008 valuation date. MPAC's last province-wide assessment update took place in 2008 and was based on a January 1,2008 valuation date.

To provide an additional level of property tax stability and predictability, the market increases inassessed value between 2005 and 2008 will be phased-in over four years. The phase-in programdoes not apply to decreases in assessed value. Any market decrease in the value of a property isapplied immediately and reflected on your most recent Property Assessment Notice.

The change in assessed values and the phased-in assessment values for the 2009 to 2012 property tax years are listed on the 2008 Notices. There is a difference between the 2008 Current Value Assessment (CVA)(the destination value) and the current year's phase-in value. The current year (which can be 2009,2010, 2011 or 2012 taxation year) phase-in value is the assessed amount that the municipalities orthe local tax authorities use to calculate the annual property taxes. An example of this is as follows:

Current year (2010) Phase-in CVA=$250,000

Total Municipal Tax Rate= 1 %

Total Municipal Tax burden = $250,000 x 1 %= $2,500.

The 2008 CVA is not used until 2012 since this is the destination value.

The municipalities/local taxing authorities set property tax rates and the province sets the educationtax rate. MPAC's assessed values are used to determine these taxes.

How MPAC Assesses Properties

MPAC's mandated role is to accurately value and classify all Ontario properties in compliance withthe Assessment Act and related regulations. To establish a property's assessed value, MPAC analyzes property sales in a community to determine the CVA. This method is used by most assessment jurisdictions in Canada and throughout the world. When assessing a residential property, we look at all of the key features that affect market value.

Five major factors usually account for 85% of the value: location; lot dimensions; living area; age of the structure(s), adjustedfor any major renovations or additions; and quality of construction. Examples of other features that may affect a property's value include: number of bathrooms; fireplaces; finished basements;garages and pools.

Site features can also increase or decrease the assessed value of your property such as traffic patterns; being situated on a corner lot; and proximity to a golf course, hydrocorridor, railway or green space.

For more information on how MPAC assesses property,  visit www.mpac.com

Now, if you are still confused or aren't too happy with your assessment, maybe we should talk. I can't change the rules but I if you know the game and play enough , you get kind of good at it!

Using Your RRSP to Buy or Build a Home in Canada

Through Canada's Economic Action Plan, the federal government is providing first-time homebuyers with additional access to their registered retirement savings plans (RRSPs) for home purchases, by increasing the Home Buyers' Plan (HBP) withdrawal limit.

                                              About the Initiative

The HBP allows first-time homebuyers to withdraw amounts from an RRSP to purchase or build a home without having to pay tax on the withdrawal. The $5,000 increase in the HBP withdrawal limit -- to $25,000 from $20,000 -- applies to withdrawals made after January 27, 2009. This is the first increase in the withdrawal limit since the HBP was introduced in 1992. It allows a couple to withdraw up to $50,000 from their RRSP funds toward the purchase of their first home. 

Amounts withdrawn are repayable in installments over a period not exceeding 15 years, starting the second year following the year the withdrawal was made.

                                                                                    How It Works

First-time homebuyers can visit their financial institution to withdraw RRSP funds under the HBP. 

                                                                                     Who Is Eligible

First-time homebuyers are eligible. An individual is generally considered a first-time homebuyer if neither the individual nor the individual's spouse or common-law partner owned and lived in another home in the year the HBP withdrawal is made, or in any of the four preceding calendar years.

Special rules apply for the purchase of homes that are more accessible or better suited to the personal needs and care of an individual who is eligible for the Disability Tax Credit. In these situations, withdrawals may be made under the HBP, even if the first-time homebuyer requirement is not met. 

                                                                                 How to Find Out More

For more information, please visit the Department of Finance Canada website or the Canada Revenue Agency website.

Of course, the easiest and less stressful way to find out more is to give me a call at 519-435-1600 if you are thinking of buying a home or condo in London Ontario

More Info:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

Where you live in Canada can make a difference in what you pay the tax man or in some provinces , tax woman.

• If you make $70,000 in income, British Columbia may be the place because you would pay a combined federal and provincial tax of $15,000, Ontario at $15,492 and Alberta with $16,292
• If you make over $150,000 a year, Alberta is the place
• Ontario has generous tax incentives
• Alberta has the lowest general corporate tax rate with a combined provincial and federal tax rate of 28%.

If you are having trouble going to sleep, you can read the full report prepared by PricewaterhouseCoopers' annual Tax Fact and Figures guide. Go to http://www.pwc.com/ca,taxfacts

Offering to pay cash for a sweetheart deal is not illegal but may not be wise if paying by cash. It is unlawful for anybody to knowingly enter into a transaction designed to avoid tax and obscure the fact that the transaction took place at all.Shoppers and home owners who opt for kickbacks or pay no tax are often left with no receipts, no warranty and no recourse.

An unlawful contract may not be enforceable in court, do not expect much sympathy from a judge if something goes wrong or the job is not finished.

Plus, you do not want CRA (Canadian Revenue Agency) on your back. Not good. You will end up paying a lot more than money if caught not paying or avoiding tax.

Just because you or others have got away with not paying tax in the past, the CRA is aggressively seeking tax avoiders and have hired more auditors to make tax avoidance one of it's top priorities.

The HST has been debated in Ontario, advertised and promoted by the Province of Ontario and the Government of Canada, on newscasts, in the newspapers, in magazines and even Facebook and twitter.All I have read today in newspapers is how motorists are upset at how much it costs now at the gas pumps, the cost of a haircut, utility bills and more. It is predicted that the HST on gas alone will bring in an additional $900 million dollars each year to the provincial coffers.

Its here folks and complaining is not going to make it go away. You have a say when it is election time as long as you don't complain that you are too busy to vote!

Daily I am asked about the impending HST that will be in force July 1, 2010 in Ontario. What is exempt? What about this? What about a house under $400,000?

What about an addition to my house or cottage? What about day care? What about your 3rd cousin on your mothers side who used to live beside a friend of her classmate in high school who married your best friend's first cousin who now lives in London vet bills? (whew, try saying that fast or typing it!).

What about air travel? Healthcare? What about school supplies?

Well, hold your breath no longer, go to www.rev.gov.on.ca/en/taxchange/taxable.html and this chart should answer most of your questions.

If not, you will be directed where to go to get answers. And if you ask me about the HST, I may tell you where to go!

Yesterday I was fortunate or some may say I was (un-fortunate) to voluntarily attend a 2 hour seminar in the morning  by the CRA (Canada Revenue Agency) and in the afternoon a 2 1/2 hour meeting of brokers of record (principle owners and head administrators) about HST at our LSTAR (London St.Thomas Association of REALTORS).

The biggest thing I noticed was the misconception and uncertainly of HST and how it reflects on real estate and why July 1 is a very important date.

From now to July 1, 2010, before you enter or consider a transaction regarding real estate, ensure you engage the advice of a knowledgeable REALTOR who has attended HST updates and can advise you of the correct steps and dates to use when buying or selling real estate in Ontario.

Home buyers and even some new home builders and renovators could be under the impression that any contracts entered into before July 1 will not be affected with HST.

Not so!

Here are some key points to understand:

• Determining whether HST applies to a new home purchase is based on the date of transfer of ownership or possession.
• The amount of the HST depends on the price of the home. For homes under $400,000 HST will apply. Currently every home has a provincial tax of 2% included.In Ontario, there is the Ontario Housing Rebate so you may not see an increase in tax on new homes, there will still be the same 2%
• If construction of a house is 85% complete on July 1, a rebate of 85% of the 2% would be payable.

Sound confusing? Watch for a simplified explanation  and a few examples that I will post over the next few months.  In the meantime, feel free to contact me and I will try to un-confuse you ,( I don't know if there is such a word as un-confuse, but what the heck, if the beaurocrats  can create confusion, so can I)

Real estate sales - are they taxable?  What about my principal residence?

The gain on the sale of real estate is a capital gain unless the property has been purchased with the intent of reselling at a profit, or developed and sold as a business endeavor.  If it is considered a business transaction, the entire profit or loss on the sale is taxable or deductible.  If the transaction is a capital gain (principal residence, summer cottage, second home, rental home, etc.), only 50% of the gain is taxable.

If the property is the taxpayer's principal residence, the principal residence exemption may eliminate all or part of the capital gain.  This exemption is claimed by including form T2091(IND) with the tax return for the year the property is sold.  CRA's policy is that the form need not be filed unless there is a taxable gain after deducting the principal residence exemption, or a capital gains election was filed in respect of the property in the taxpayer's income tax return for 1994.  However, if there is any question as to whether the principal residence exemption applies in whole or in part, it would be wise to file the form anyway because failure to file the form could result in a disallowed principal residence exemption.

There aren't any set rules about how often a person can buy or build a house, move into and reside in it, then sell it, without the transactions being considered business transactions.  Canada Revenue Agency (CRA) would look at the frequency and the intent (i.e., whether the houses were being purchased or built with the goal of reselling and making a profit, or because the person wanted a new house to live in).  They might even look at a single event of purchasing or building and reselling a house and decide that it was a business transaction, even if the house has been used as a principal residence.  Check out the current version of Interpretation Bulletin, IT-218, re profits on the sale of real estate, especially the first few paragraphs.

If land is purchased without a housing unit on it, that property cannot be considered the principal residence until the year that a house is built and you move into it.

CRA usually considers that if there is more than 1/2 hectare (1.25 acres) of property, only 1/2 hectare of the land can be considered part of the principal residence, and there would be a capital gain on the excess when the property is sold, even if the rest is the principal residence.  However, they also consider whether the property is subdividable.  Thus, if the property is 2 hectares, and is not subdividable, they may consider the whole amount of the land to be part of the principal residence.

There is a lot of information on this topic in CRA's Interpretation Bulletin IT120, Principal Residence, including the part about building on vacant land, the 1/2 hectare rule, etc.  This bulletin also contains a link to form T2091(IND) for the principal residence exemption.

Tax tip:  Before making any real estate investments, make sure you know the tax consequences.

Homeowners Eligible  for up to $5,000 EcoEnergy Retrofit In Canada

                                    About the Program

ecoENERGY Retrofit - Homes provides home and property owners with grants of up to $5,000 to offset the cost of making energy-efficiency improvements. The grants apply to a range of measures that reduce energy consumption and provide for a cleaner environment, from increasing insulation to upgrading a furnace. The maximum grant for property owners with multiple properties is $500,000. 

                                   How It Works

Before undertaking any energy-efficiency renovations, the homeowner hires an energy advisor certified by Natural Resources Canada to perform an energy evaluation on the home. The homeowner selects which improvements to do and implements the recommended energy upgrades, leaving time to ensure that the post-retrofit evaluation is completed within 18 months or before March 31, 2011, whichever comes first. The homeowner calls the energy advisor to perform the post-retrofit evaluation, which will confirm the home's new energy rating. The advisor submits the ecoENERGY Retrofit grant application to the Government of Canada. If applicable, the application will also be forwarded to the collaborating provincial and territorial retrofit program for further financial reimbursement.  Approved reimbursements are then sent out to applicants.

                                       Who Is Eligible

Owners of single-family homes (detached, semi-detached and low-rise, multi-unit residential buildings that are no more than three storeys high) are eligible. Additionally, owners of some small buildings less than three storeys high, where at least 50 percent of the floor area is used for permanent residences, are also eligible. 

                             How to Find Out More

For more information, visit the ecoACTION website. Information is also available from the Government of Canada inquiries line at 1 800 O-Canada (1-800-622-6232) (teletypewriter: 1-800-926-9105). For other local or provincial programs or bank allowances, give me a call, I can help.

                                   Initiative Update

As well, the website has been updated to make it even easier for Canadians to find an energy advisor in their area. More than 1,400 energy advisors are now employed across the country, an increase of 300 since April 1, 2009.

Canadians are reducing their energy consumption and investing in their local economy. It is estimated that for every $1 invested by the program, homeowners are investing $10 directly in the renovation industry.

More Info:
http://oee.nrcan.gc.ca/residential/personal/home-improvement.cfm?attr=0

 

           First Time Homebuyers Tax Credit in Canada

                                                 About the Initiative

The HBTC will assist first-time homebuyers with the costs associated with the purchase of a home, such as legal fees, disbursements and land transfer taxes, which are a particular burden for first-time homebuyers, who must also save for a down payment.

The $5,000 non-refundable HBTC amount will apply to qualifying homes acquired after January 27, 2009, and will provide up to $750 in federal tax relief.

A qualifying home is generally considered to be a housing unit located in Canada that the individual or individual's spouse or common-law partner intends to occupy as the principal place of residence no later than one year after its acquisition.

Any unused portion of an individual's HBTC may be claimed by the individual's spouse or common-law partner. When two or more eligible individuals jointly purchase a home, the credit may be shared but the total credit amount claimed cannot exceed $5,000.

                                                         How It Works

First-time homebuyers purchasing a home will be able to claim the HBTC on their income tax returns, starting in 2009. Claimants should ensure that documentation supporting the purchase transaction is available if requested by the Canada Revenue Agency. Claimants are also responsible for making sure that all applicable eligibility conditions are met. 

                                                      Who Is Eligible

First-time homebuyers are eligible. An individual is considered a first-time homebuyer if neither the individual nor the individual's spouse or common-law partner owned and lived in another home in the year of the home purchase or in any of the four preceding calendar years. Special rules apply for the purchase of homes that are more accessible or better suited to the personal needs and care of an individual who is eligible for the Disability Tax Credit. In these situations, the HBTC can be claimed, even if the first-time homebuyer requirement is not met. 

                            How to Find Out More

For more information, please visit the Department of Finance Canada website or the Canada Revenue Agency website. Or give me a call or an email, I can help you with the many programs available.

For other incentives, give me a call.