How to Handle Toronto's Inherent Property Tax Increase: Tax Advice for First-Time Buyers

Mark Virgil Lofranco • 9 December 2024

Buying your first home in Canada is an exciting milestone. However, potential and current homeowners in Toronto should be aware of a major change on the horizon: a proposed 10.5% increase in residential property taxes, the largest since 1998. This hike, driven by a nearly $1.8B budget shortfall, includes a 1.5% increase dedicated to city-building projects, such as transit and housing. Homeowners could face an extra $26.75 per month, or $321 annually, in property taxes. City officials have also warned that without federal funding, property taxes could rise even further, up to 16.5%.

If you’re concerned about the impact of these changes on your finances, here are five tax credits, deductions, and rebates that can help offset the burden:


1. Homebuyers’ Amount


First-time homebuyers can benefit from the homebuyers’ amount, a non-refundable tax credit of up to $10,000 for homes purchased in 2022 or later. If you bought your home in 2021 or earlier, the credit is capped at $5,000. This credit can provide some relief against rising costs due to increased taxes.


Eligibility criteria include not having owned a home in the past four years. However, if you or your spouse are eligible for the disability tax credit (DTC), the four-year rule is waived, and you can claim the homebuyers’ amount if you buy a more accessible home.


2. Home Buyers’ Plan (HBP) Repayments


The Home Buyers’ Plan (HBP) allows first-time homebuyers to withdraw up to $35,000 from their registered retirement savings plan (RRSP) tax-free to buy or build a home. With property taxes increasing, this plan offers financial liquidity when needed most.


HBP repayments begin in the second year after your withdrawal, with up to 15 years to repay the full amount. If you fail to repay a scheduled amount, it will be added to your taxable income for that year.


3. GST/HST New Housing Rebate


If you’ve bought a new or substantially renovated home, the GST/HST new housing rebate can offer financial relief. This rebate reduces the financial burden imposed by the GST/HST on newly built or significantly renovated homes. The rebate amount depends on the value of the home and the GST/HST paid.


4. Rental Property Relief


If you own rental property, the Toronto property tax increase will affect you as well. Property taxes for rental properties are expected to increase by around $321 annually. It’s essential to declare rental income on your tax return and take advantage of deductible expenses such as property taxes, mortgage interest, utilities, insurance, and maintenance costs to reduce your taxable income.


5. Home Accessibility Tax Credit (HATC)


If you’re a senior (65 years or older) or a person with disabilities, you may qualify for the home accessibility tax credit (HATC). This tax credit covers up to $10,000 in renovation expenses that make your home safer or more accessible. Those supporting a qualifying individual may also be eligible for this credit.


By leveraging these tax credits and deductions, homeowners and landlords can navigate the financial impact of rising property taxes and maintain more control over their finances.

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