First-time home buyer? You’re eligible for a tax credit
Canada Life - Feb 15, 2022
Are you a first-time home buyer?
Purchasing your own home is not only one of the biggest investments you’ll ever make in your life, it can also be a stressful one. Apart from all the details involved in buying your home – the legal/notary and inspection fees, land transfer taxes, closing costs, etc. – there’s the economic uncertainty we’re seeing because of the pandemic. Luckily, there are a few credits and rebates to help make the journey to your first home a little easier. Let’s look at some of these.
1. First time home buyer’s tax credit
Introduced in 2009, the first-time home buyer’s tax credit is a $5,000 non-refundable tax credit, available to all Canadian taxpayers who qualify. By applying for it, you can get a tax rebate amounting to $750 ($626, for Quebec homebuyers, taking into account the reduction for Quebec residents).
In addition, Quebec residents receive a similar provincial tax credit of $750. Quebecers may therefore be entitled to both separate tax credits (for a total maximum tax relief of $1376) when purchasing a first home or other qualifying accommodation.
You’re eligible for the federal tax credit if you:
- Buy a home registered in your or your spouse’s or common-law partner’s name. It can be an existing property or under construction, including single-family structures, townhouses, condo units and more.
- Are a first-time home owner. This means you didn’t live in a property that you or your spouse or common-law partner owned in the previous four years.
- The qualifying home becomes your principal residence within one year after you bought or built it.
Here’s how it works:
The process to claim the first-time home buyers’ tax credit is quite simple. You don’t need to apply or approved. If you meet the eligibility requirements, you can put the home buyer’s amount of $5,000 on Line 31270 of your income tax return. You’re allowed to split the amount with your spouse or common-law partner, but your combined total claims must not exceed $5,000. The credit will amount to a $750 rebate on your taxes owed for the year. Make sure you have all the documentation on the purchase of your home ready in case the Canada Revenue Agency (CRA) needs to verify your eligibility.
To apply for the Quebec tax credit and find out the eligibility criteria, you must complete the Home Buyer's Tax Credit form and attach it to your income tax return.
2. Land transfer tax rebates
The land transfer tax is often the biggest part of the closing costs associated with buying a home. Certain provinces, including Ontario, BC and PEI, offer rebates to first-time home buyers to help offset this tax amount.
3. GST/HST new housing rebates
If you had to pay GST or HST when you bought your home, you may qualify for a rebate from the federal or your provincial government.
4. Home Buyers’ Plan
The Home Buyers' Plan (HBP) is a federal program that allows you to withdraw from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. The current HBP withdrawal limit is $35,000 and applies to withdrawals made after March 19, 2019.
If you’re planning to buy a home and want to know more about which tax rebates you qualify for, don’t hesitate to get in touch with me.
The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.