Tax tips: what you need to know if you bought or sold real estate in 2023
Income tax return deadlines are around the corner. If you bought or sold a property in 2023, there’s some important stuff you need to know before you file.
If you bought a home for the first time…
You get a bit of a tax break. You can claim $10,000 with the Home buyers' amount, as long as you move into it yourself within a year of purchase. You have to be a first-time buyer to qualify, which means neither you nor your spouse/common-law partner has owned a home in the last 4 years.
You don’t have to worry about paying back your First-Time Buyers’ loan just yet. You have 2 years after withdrawing the money before you have to start repaying it. And you have 15 years to pay it back (no need to pay more than the minimum, since there’s no interest on the loan). If you happen to forget one year, you’ll end up owing income tax on the repayment amount for that year.
Tip: Repaying your First-Time Homebuyers’ loan isn’t as simple as just putting money in your RRSP. You have to indicate how much of that money is intended to pay back your loan on your tax return.
Read more: Tax-free savings tools to help you buy your first home
If you bought a brand-new house or condo…
You can claim a rebate on the HST/GST you paid – if it’s going to be where you live yourself. If you bought the property as an investment to flip or rent out, you won’t automatically qualify for the rebate: you’ll need to pay the full tax amount on closing, then apply for the rebate once you’ve found a renter.
If you sold a home…
If you sold your principal residence (the one you actually call home), you don’t have to pay tax on any profit you make – the difference between the buying price and the selling price is all yours.
If you sell a home that’s NOT your principal residence – an investment property, cottage, or second home – 50% of your capital gains (profits) are subject to tax.
Let’s say you bought a condo for $500K a few years ago and sold it for $700K. Your capital gains on that sale are $200K, so you’ll have to pay tax on $100K of that. If it’s an investment property, you’ll have some deductions like money spent on improvements, finding renters, commissions, etc., which will lower your capital gains amount. Keep in mind that any capital gains are added to your personal income for the year of the sale, which can easily bump you into a higher tax bracket. Want to know more? Read the Tax implications of selling an investment property for a deeper dive.
We recommend talking to your accountant or financial professional to understand what applies to your specific situation.
Looking to buy or sell in 2023? Sign up to condos.ca or property.ca to get started.