Purchasing your first home can be an intimidating experience, especially when the extra fees you’ll need to pay during closing start to add up. Legal expenses, inspection fees, and land transfer taxes—the list of closing costs you’ll be paying goes on and on, and purchasing a home for the very first time starts looking less and less affordable. Trying to salvage every last bit of whatever’s left in your bank account? The First-Time Home Buyers’ Tax Credit (HBTC) will help you earn small rebates that help recover some of those costs.
Being able to afford a new home doesn’t need to be as daunting as it seems, even with soaring housing prices in some markets. To help you make sure you’re taking advantage of every last credit and rebate available to you, we’ve gathered the details you’ll need to know when claiming the First-Time Home Buyer’s Tax Credit.
What is the First-Time Home Buyers’ Tax Credit?
In 2009, the First-Time Home Buyer’s Tax Credit became available to Canadians to help make buying a home more affordable. If you’re buying a home for the first time, it’s in your best interest to claim $5,000 of your down payment on your next tax return. Ultimately, if you and your home are eligible, this tax credit can land you a total tax rebate of $750–not a game-changing amount but it’s better than nothing.
Since the First-Time Home Buyers’ Tax Credit is a non-refundable credit, it’s available to all qualifying Canadian taxpayers.
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Am I considered a first-time homebuyer?
The Canada Revenue Agency (CRA) sets out a list of requirements that determine who counts as first-time homebuyers. Have you owned a home or lived in a home owned by your partner within the last four years? If the answer is no, then you’re set.
Does my home qualify?
There are a few factors that play into your home’s eligibility for the tax credit. If you’ve just purchased a single-family or semi-detached house, townhouse, mobile home, or condo for the first time, chances are that yours is a qualifying home.
Secondly, the home itself needs to be an existing or new home, located in Canada, and you need to move in within one year of making the purchase. Finally, the home needs to be listed as your principal residence and registered under your name (or your partner’s name). It’s as simple as that. Just make sure you’re able to present documents that prove your purchase, if required.
Note that for those with shares in a cooperative housing unit, shares that provide the right to tenancy won’t qualify. Rather, only shares that provide possession of the unit will be eligible.
Claiming the credit for people with disabilities
Even if you’re not a first-time homebuyer, you can still claim the credit if you have a disability. Or, if you’re purchasing a home that a person with a disability will live in it within the next year, you can also claim the credit.
How does it work?
Personal income tax forms are a hindrance to many of us but the process to claim the First-Time Home Buyers’ Tax Credit is very quick. Once your home is registered with the applicable land registration system, either under your or your spouse’s name, your home will be listed as “acquired.” On the next tax return, fill in line 369 of Schedule 1, Federal Tax with “$5,000.” You have to do this within one year of the acquisition date so make a note to yourself not to forget!
The CRA takes this amount and then multiplies it by the current year’s lowest personal income rate. You have a maximum possible rebate amount of $750.
What if I’m buying a home with someone else (spouse, common-law partner, or friend)?
If you’re both eligible for the credit, it doesn’t matter who claims it. You can even choose to split it as long as the total credit doesn’t exceed $5,000. In other words, the CRA won’t be giving out more than the maximum $750 rebate for each home.
Does the HBTC affect my eligibility for the Home Buyers’ Plan?
Luckily, it doesn’t! The First-Time Buyers’ Tax Credit and Home Buyers’ Plan aren’t mutually exclusive programs. You’re eligible to claim and benefit from both.
Are there other ways to save that I should be aware of?
Your eligibility for other applicable First-time homebuyers’ grants are also unaffected after you have received the First-Time Home Buyers Tax Credit. It may be in your best interest to see if you qualify for other grants and credits, such as land transfer tax rebates, GST/HST New Housing Rebate, or the RRSP Home Buyers’ Plan. And be sure to shop around for the best mortgage rate to reduce the cost of owning a home.
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