10 Sensible Tax Strategies for Ontario Homeowners
Owning a home in Ontario comes with plenty of responsibilities, but also some tax advantages if you're strategic about how you manage your property and finances.
Whether you're a first-time buyer, a long-time homeowner, or nearing retirement, understanding how to make the most of available tax incentives can lead to significant savings.
Here are 10 practical tax strategies Ontario homeowners can consider to help reduce costs, grow equity, and build long-term wealth.
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1. Claim the Principal Residence Exemption (PRE)
One of the most valuable tax benefits in Canada is the Principal Residence Exemption. When you sell your primary residence, any capital gains are generally tax-free. To qualify, the home must be designated as your principal residence for each year you owned it. This makes the PRE one of the most powerful tools for building tax-free wealth through real estate.
Tip: If you own multiple properties, speak with a tax advisor about how to designate your principal residence strategically for maximum benefit.
2. Deduct Mortgage Interest on Income-Producing Properties
While mortgage interest on a principal residence is not tax-deductible in Canada, it is deductible on income-generating properties. If you own a rental unit or a portion of your home is rented (e.g. a basement suite), you may be able to deduct a portion of your mortgage interest, property taxes, and utility expenses against your rental income.
Tip: Keep accurate records and determine what percentage of your home is used for income purposes to stay compliant with CRA regulations.
3. Use the Home Accessibility Tax Credit (HATC)
If you or a family member is a senior or has a disability, you may qualify for the Home Accessibility Tax Credit. This non-refundable credit allows you to claim up to $10,000 in eligible home renovation expenses to improve safety or accessibility. That translates into up to $1,500 in tax savings.
Tip: Renovations must be permanent and improve access or reduce risk of injury (e.g. installing grab bars, widening doorways).
4. Take Advantage of the Multigenerational Home Renovation Tax Credit
Starting in 2023, this new credit helps families create a secondary suite for a senior or adult with a disability. Eligible renovations (up to $50,000) can provide a 15% refundable tax credit (up to $7,500).
Tip: The suite must be a self-contained unit with its own entrance, kitchen, and bathroom.
5. Claim Expenses for a Home Office
If you work from home—either full-time or part-time—you may be able to claim a portion of your home expenses as a deduction. This includes utilities, home internet, repairs, rent (if you don’t own), and in some cases, property taxes and mortgage interest.
Tip: The simplified method (temporary flat rate) is easy to apply, but the detailed method often provides larger deductions.
6. Use the First Home Savings Account (FHSA)
As of 2023, first-time homebuyers can save up to $8,000 per year (to a maximum of $40,000) in an FHSA. Contributions are tax-deductible and withdrawals are tax-free when used to purchase a qualifying home.
Tip: Combine the FHSA with your RRSP (Home Buyers’ Plan) and TFSA for a powerful trio of tax-advantaged savings.
7. Maximize the Home Buyers’ Plan (HBP)
If you're a first-time homebuyer (or haven't owned a home in 4+ years), you can borrow up to $35,000 from your RRSP to put toward a down payment. It’s a tax-free withdrawal as long as you repay it over 15 years.
Tip: Both you and your spouse/partner can withdraw $35,000 each for a total of $70,000.
8. Claim Moving Expenses (When Eligible)
If you've moved at least 40 km closer to your new place of work, business, or full-time education, you may be eligible to claim moving expenses. These include transportation, storage, temporary accommodations, and legal fees.
Tip: Keep receipts and mileage logs to support your claim in case of an audit.
9. Capital Cost Allowance (CCA) for Rental Properties
If you own rental property, you can claim depreciation (Capital Cost Allowance) on the building, not the land. This allows you to reduce taxable rental income, although it can lead to a recapture tax when you sell.
Tip: Use CCA wisely—don’t overclaim if you plan to sell the property soon.
10. Leverage the Smith Maneuver
This advanced strategy involves converting your mortgage into a tax-deductible loan by using a home equity line of credit (HELOC) to invest in income-generating assets. Over time, this can transform non-deductible mortgage interest into a tax-deductible investment loan.
Tip: Work with a financial advisor to structure this properly and avoid risky investments.
Final Thoughts
Owning a home in Ontario can be expensive, but these tax strategies offer powerful ways to reduce your costs, unlock value, and build wealth. Whether you're looking to maximize deductions, plan for retirement, or invest in your family's future, it pays to understand how the tax system works—and to take advantage of every legal opportunity to benefit.
Always consult a tax professional before making major financial decisions, especially when it comes to complex deductions or income-splitting strategies. With a smart plan and the right guidance, you can make your home work harder for you, year after year.
