Property taxes are not only a vital source of revenue for governments but also a significant expense for property owners. Whether you’re a homeowner or a property management company, understanding how to lower your property taxes can make a big difference during tax season. This article will explore various strategies to help you reduce your property tax burden and save money.
Understanding Your Tax Responsibilities as a Property Owner
In Canada, property owners and renters are responsible for paying property taxes. The specific tax obligations vary depending on the municipality you reside in. Homeowners pay property taxes directly to the municipal government, while renters typically contribute to property taxes through their monthly rent payments.
Property taxes are typically paid annually, semi-annually, or quarterly. The amount you owe is calculated based on two main factors: the municipal property tax rate and the assessed value of your property. Government-authorized entities regularly assess property values to determine their worth.
Filing Your Property Taxes: What You Need to Know
When filing your property taxes, you have a couple of options. You can pay the municipality directly or include the property tax payments with your mortgage. Payment methods include phone, mail, online, or through a bank, credit union, or financial institution. Setting up pre-authorized advance payments with a financial institution is also possible.
In some cases, property taxes may be combined with your mortgage. This is often required for first-time homebuyers or individuals with less than 20% home equity. Property taxes are typically divided into 12 monthly payments when paid through a mortgage.
10 Tax Deductions That Benefit Canadian Homeowners
As a homeowner in Canada, you have access to various tax deductions that can significantly reduce your filing costs and save you money. Familiarizing yourself with these deductions can lower the overall cost of moving, renting, and managing your property. Here are ten deductions you should be aware of:
- First-Time Home Buyers’ Tax Credit (HBTC): If you purchased your first home in the last year or have not owned a self-owned home in the past four years, you may qualify for this tax credit. It can add up to $750 to your tax refund. Note that the property must be your primary residence, which can be verified through public records like the mailing address or income taxes.
- HomeBuyers Plan (HBP): The HBP allows residents of Canada with qualifying Registered Retirement Savings Plan (RRSP) contributions to make a tax-free withdrawal of up to $35,000 towards their first home’s down payment. The withdrawn amount must be repaid within 15 years through RRSP contributions to remain tax-free.
- GST/HST New Housing Rebate: If you have paid Goods and Services Tax (GST) or Harmonized Sales Tax (HST) on a recently built or renovated home, you may be eligible for a refundable credit in the form of a new housing rebate.
- HBTC for People with Disabilities: Even if it’s not your first home purchase, you may qualify for the HBTC if you meet the CRA’s criteria for a person with disabilities. This benefit is accessible to individuals with a qualifying spouse or common-law partner.
- Home Accessibility Tax Credit (HATC): If you renovate your home for accessibility reasons, you may be eligible for this tax credit. It can help you save up to $10,000 in taxes. Eligibility requirements include being a homeowner who qualifies for the disability tax credit or is over 65 years old.
- Medical Expenses Tax Credit: Similar to the HATC, you can recover up to 25% of eligible medical expenses as a tax credit refund if you make your home more accessible for yourself or a qualified dependent.
- Rental Income Deductions: If you have rental real estate, it must be declared taxable. However, you can claim various allowable expenses, such as advertising fees, repair costs, property taxes, insurance, and interest on borrowed money for purchasing or renovating a rental property. Capital improvement costs may also be deductible.
- Capital Cost Allowance (CCA): Rental property owners can deduct expenses on renovations made to their properties, considered depreciating assets, through the CCA. However, if you sell the property, the value of CCA claims may need to be repaid as a capital gains tax.
- Tax-Deductible Moving Expenses: If you are moving at least 40 kilometres to start a new job, launch a business, or pursue full-time post-secondary education, you can deduct travel and moving expenses. Eligible costs include travel expenses, moving company bills, hotel bills, and legal fees.
- Home Office Expenses: Homeowners who use their principal residence as their place of work may be eligible for home office deductions. This includes deducting a portion of utility bills, homeowners’ insurance, internet bills, office supplies, and other relevant business expenses.
By taking advantage of these tax deductions, you can maximize your savings and reduce the financial burden of property ownership.
Remember, it’s always a good idea to consult with a tax professional or accountant to ensure you maximize your tax savings within the confines of the law. If you need any help our expert team at Muntaha CPA is here to guide you through the process. Contact us today to ensure you’re making the most of these valuable deductions and reducing your property tax burden. Don’t miss out on potential savings! 📞📊