The value of your home and your family’s lifestyle can help you save thousands of dollars in taxes each year.
But it can also cost you money if you are not careful, according to a new report by the Canadian Council on Quality and Standards.
The Council on Qualitative Analysis of Quality and Consumer Goods found that in 2016, people in the highest-income bracket paid the most for their housing, the highest rate of luxury purchases and the largest share of their disposable income in property taxes.
But the biggest costs are in the lower income brackets where property values and prices have been declining and where there are fewer options for buying homes, the report says.
For example, the median price of a detached home in the lowest income bracket is $6,500, or about 20 per cent higher than the median home value in the middle class.
The average home price in the higher income bracket in the 2016-17 fiscal year was $3,946, according the Council on Specified Property.
The report says there are three main ways to reduce your taxable income, the most effective of which is to purchase property, or to sell a property to finance your retirement.
The first is to buy a home, which can save you thousands of extra dollars in property tax.
However, it can only help so much, said Doug Mitchell, executive director of the Council of Canadian Quality and Regulatory Authorities.
“The other thing is to go into a retirement portfolio that has a lot of assets, and to diversify,” he said.
For example, if you own your own home, you will be able to put your retirement savings into your investments, such as equities or other property, and sell the property to help you fund your retirement, Mitchell said.
If you own a condominium, you could sell your home to fund a retirement plan, but Mitchell said the condo’s owner must still be the one who pays property taxes on the property.
If you buy a house, you should have no trouble getting your money out of your property tax bill, Mitchell added.
People in the low-income and middle-income brackets also have an easier time buying expensive homes, but it’s still important to make sure you don’t miss out on saving on your property taxes, Mitchell noted.
In the case of luxury goods purchased with a capital gains tax credit, it’s important to keep your taxable incomes low, said Robyn McCowan, senior vice president and chief economist at the Canadian Federation of Independent Business.
She said if you use the credit to buy things such as jewelry, art, and art cars, you’re better off than the average person because the value of the items can drop.
Some people are saving a small amount to purchase expensive properties, but McCowan said that’s only for the most important items, such a wedding, and not for things that don’t necessarily make up the bulk of the purchases.
“You don’t have a large amount of luxury items and you don, so if you’re going to spend on a large-sized item, it may not be worth it,” McCowan added.
The report is part of the CRA’s Tax Relief for Businesses program, which helps small businesses pay property taxes through the Canada Revenue Agency.
It was released today.