What is the First-Time Home Buyers’ Tax Credit?

What is the First-Time Home Buyers’ Tax Credit?

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    Published 09/09/2020 15:09 EST
    Updated 16/09/2020 14:09 EST

    There are some excellent incentives and credits available to help you save money while buying your first home. The First-Time Home Buyers’ Tax Credit (HBTC) is one such program offered by the federal government to help offset closing costs associated with buying your first home. Following are the ins and outs of this program, and details on how you can benefit.

     

    Key Takeaways
    • The First-Time Home Buyers’ Tax Credit allows first-time home buyers to claim $5,000 on personal tax returns, resulting in a maximum $750 rebate
    • You can also qualify for the First-Time Home Buyers’ Tax Credit and not be buying a home for the very first time if you’re eligible for the disability tax credit or you acquired the home for the benefit of a related person who’s eligible for the disability tax credit
    • Ontario, British Columbia and Prince Edward Island offer first-time home buyers refunds of all or part of the Land Transfer Tax. And, in Toronto and Montreal, you can even take advantage of an additional Municipal Land Transfer Tax Rebate

    Important

    You must apply to receive the credit on the tax return in the same year in which you purchase a home

    How do I qualify for the First-Time Home Buyers’ Tax Credit (HBTC)?

    The HBTC allows you, as a first-time home buyer, to claim $5,000 on your personal tax return, resulting in a maximum $750 rebate. You must apply to receive the credit on the tax return in the same year in which you purchase a home.

    You’re eligible to claim $5,000 for the purchase of a qualifying home if both of the following points apply:

    • You or your spouse/common-law partner acquired a qualifying home
    • You didn’t live in another home owned by you or your spouse/common-law partner in the year of the acquisition or in any of the four preceding years (first-time home buyer)

    You can also qualify for this tax credit and not be a first-time home buyer if either of the following applies:

    • You’re a home buyer who’s eligible for the disability tax credit 
    • You acquired the home for the benefit of a related person who’s eligible for the disability tax credit

    The HBTC is calculated by multiplying the lowest personal income tax rate for the year (15% in 2020) by $5,000 – 15% X $5,000 = $750.

    You must apply to receive the credit on the tax return in the same year in which you purchase a home. When completing your tax return, enter $5,000 on line 31270. You and your spouse/common-law partner can split the claim, but the combined total claimed can’t exceed $5,000.

    Home Buyers’ Tax Credit (HBTC) for people with disabilities

    There are two exceptions within the HBTC that allow you to take advantage of the savings even if you’re not a first-time home buyer. 

    You can qualify for this tax credit if either of the following applies:

    • You’re a home buyer who’s eligible for the disability tax credit 
    • You acquired the home for the benefit of a related person who’s eligible for the disability tax credit

    Land Transfer Tax Rebate (LTTR)

    Land Transfer Tax (also known as the Property Transfer Tax or Welcome Tax) was introduced in most Canadian provinces during the 1970s (in Ontario and Quebec) and 1980s (BC). It was a source of revenue for municipalities, who are forbidden from taxing such things as income, sales, etc. It’s paid to the province (or the municipality, in some instances) by the buyer of a property. See: Everything You Need to Know About the Land Transfer Tax

    In some provinces – Ontario, British Columbia, and Prince Edward Island – first-time home buyers are eligible for a refund of all or part of the Land Transfer Tax. And, in Montreal and Toronto, you can even take advantage of an additional Municipal Land Transfer Tax Rebate. See: First-Time Home Buyer Programs in Canada

     

    GST/HST New Housing Rebate (NHR)

    If you’re purchasing a newly built home from a builder, or are custom-building your own home, you may qualify for a rebate of the provincial GST or the federal part of the HST that you paid on the home.

    👆 Tip

    Look into the details of your provincial rebate part of the New Housing Rebate to ensure you apply on time if eligible

    Details of the rebate may vary by province even though it’s a federal program. The new home rebate application in Ontario, for instance, must be filed within two years of the new home closing date. The maximum Ontario new housing rebate amount for owner-built houses depends on whether you paid the HST on your purchase of the land. The Ontario new housing rebate is limited to a maximum of $24,000 if you paid the HST on the purchase of the land, and $16,080 if you didn’t.

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