USA v Canada: First Time Home-Buyers Tax Credit
November 7, 2009
First Time Home-Buyers Tax Credit was one of the governments action incentives to help with the housing decline. Although, in comparison to the first time home-buyers tax credit granted by the US government, the Canadian one seems like a joke. Although who’s laughing?
Let’s begin by investigating both the tax credits on display. Proposed on a $5,000 deductible is the Tax Credit presented by Canada’s Federal government. Multiplied by the lowest income tax rate (15%), it adds up to a net $750 credit for someone who wants to buy a housing unit in Canada and didn’t own property during the last four years.
In the USA the real estate value is the key to this credit as up to 10% of its value is used to calculate the tax credit. There is one significant difference – this sum is not deducted from the tax base (like ours), but deducted from the customer’s income tax owing. The tax credit incentive is cashed back to the new home purchaser if tax owed by them doesn’t exceed the $8,000. Whereas in Canada a person can’t have owned a home for the 4 years preceding, in the US this is only 3.
The Canadian and US housing market recovery is down to very different things; in the US its down to these enormous tax credits whilst in Canada it is believed to be down to interest rate cuts. First time buyers in the US are now in a position of power when acquiring real estate due to decrease in pressure to find large down payments. Seeing the benefit of the US tax credit, the first thought is shouldn’t Canada be looking more intently at these opportunities?
What Canadians need to ask themselves, is “do we want it”? Whilst both Canada and the US have both been in recession there has been a marked difference in the consequences of it. The Canadian market made a comeback within a few months with the main losers being real estate investors and estate agents; but the Americans have seen the drop hit home owners with a lot of short sales and forclosures.
Then we need to think about public funds and debts. Billions of dollars in lost tax revenue doesn’t help the already struggling budget shortage when 1.5 million taxpayers are claiming this tax plan.
To read the rest, please look at our original article “Is the First Time Home-Buyers Tax Credit Really as Good as It Sounds?” Thank you.
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