Section 2 – Individuals and Families
Tax credit for the upgrading of residential waste water treatment systems – Quebec
A refundable tax credit is offered for expenses paid by an individual no later than December 31, 2022 for work to upgrade residential waste water treatment systems. The credit is equal to 20% of the portion of eligible expenditures that exceed $2,500 but are not more than $30,000 (for a total maximum tax credit of $5,500) per eligible dwelling. Generally, work recognized for the purposes of this credit relates to the construction, renovation, modification or rebuilding of a system for the discharge, collection and disposal of waste water, toilet effluents or grey water. Eligible work must be carried out by a contractor under the terms of an agreement entered into after March 31, 2017 but before April 1, 2022.
First-time Home Buyer Credit
An individual who acquires his/her first home to use as a principal residence is entitled to a non-refundable tax credit of 15% for federal and Quebec purposes of $5,000 (maximum credit of $750 at each level). An individual is considered to have purchased his/her first home if neither he/she nor his/her spouse owned and occupied another dwelling during the year of the purchase or the four preceding calendar years. The credit may also be claimed in respect of certain dwellings acquired by an individual who is entitled to the disability credit or for his/her benefit.
Other Credits or Home Assistance Program
Various tax credits and home assistance programs are available for seniors and persons with disabilities (see Section IV).
Home Buyer’s Plan
The HBP allows a taxpayer and his/her spouse to borrow, without any tax consequences, up to $35,00021 from each of their RRSPs to purchase a home in which they are going to live. A number of conditions must be met, including:
- The taxpayer must be the buyer of a first home, that is neither the taxpayer nor his/her spouse have owned a home they used as a principal residence during the year of the withdrawal22 or the four preceding calendar years.
Example: A taxpayer wants to make an HBP withdrawal on February 1, 2021. He/she must not have owned a home from January 1, 2017 to January 1, 2021.
- When the amount is withdrawn, the taxpayer must have entered into a written agreement to buy or build a home that he/she intends to use as a principal residence.
- The taxpayer must make annual repayments of the amount borrowed over a period of not more than 15 years. Any unpaid amount for a particular year, will be included in his/her income for the year. Each year, taxpayers who participate in the HBP receive a statement from the CRA showing repayments to date as well as the amount that has to be repaid the following year.
Contributions to the taxpayer’s RRSP or the RRSP of his/her spouse during the 89-day period preceding the withdrawal may not be deductible.
A taxpayer can make use of the HBP in a given year for a second time if, in the preceding year, he/she repaid the total HBP withdrawal previously made and he/she meets all the conditions required to be eligible once again.
Special rules are provided for disabled individuals and situations where the taxpayer who used the HBP turns 72, dies or leaves Canada.
21 Since 2019 ($25,000 before that date). 22 Except for the period ending 31 days before the date of the withdrawal.
Breakdown of the marriage or common-law partnership
For withdrawals since 2020, the HBP rules will be eased for spouses who separate, to allow them to use the HBP to buy out the former spouse’s share in the residence or a new residence. Thus, a taxpayer is considered to buy a first home if the following conditions are satisfied:23
- At the time of the withdrawal, the taxpayer and his/her spouse have been living separately for at least 90 days;
- The withdrawal is made in the year of the separation or in the next four calendar years;
- Either the principal residence is sold no later than two years after the end of the year in which the withdrawal is made or the taxpayer purchases the former spouse’s share in the home no earlier than 30 days before making the withdrawal and no later than September 30 of the year following the withdrawal;
- If the HBP has been used, the amount must be repaid in full.
23 Moreover, all the other conditions of the HBP rules must have been met to be eligible. Special attention is required when the individual has a new spouse at the time of the withdrawal.
Exemption – Principal Residence
The capital gain on a principal residence is not taxable provided the taxpayer designates it as his/her principal residence in his/her income tax return. Only one property may be designated as a principal residence for a year per family. A number of family residences may be eligible for the exemption even if they are only used on weekends, e.g. cottages or secondary residences in Canada or elsewhere.
Special rules apply when the taxpayer starts to rent all or part of his/her residence.
This document is up to date as of September 3, 2020 and reflects the status of legislation, including proposed amendments at this date.