What is the First Time Home Buyers' Tax Credit in Canada?
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The First-Time Home Buyers’ Tax Credit (HBTC) allows first-time buyers in Canada to claim up to $10,000 for a tax credit of up to $1,500 on their tax return. While this may not sound like a lot of money, especially with ever-increasing property prices, it is a relatively straightforward tax credit to apply and qualify for.
In this article, we’ll outline the HBTC, how to qualify, how much you can claim, and other first-time home buyer incentive programs available in Canada that you can utilize with the HBTC to increase your savings when purchasing your first home.
- The First-Time Home Buyers’ Tax Credit allows first-time home buyers to claim up to $10,000 on personal tax returns, resulting in a maximum $1,500 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.
- Other tax credits and rebates are available for first-time buyers in addition to the HBTC, allowing you to apply for each program you are eligible for and maximize savings.
Are you a first-time buyer?
What is the First-Time Home Buyers’ Tax Credit?
The program gives eligible first-time home buyers up to a $10,000, non-refundable income tax credit on qualifying homes, resulting in up to $1,500 rebate back on your tax return in the year you buy your home.
Tip: The Home Buyer’s Tax Credit (HBTC) is calculated by applying Canada’s lowest personal income tax rate (15%) to $10,000. 15% of $10,000 = $1,500.
Who Can Claim the First-Time Home Buyers’ Tax Credit?
You are eligible to claim the Home Buyers’ amount as a first-time homebuyer if the following points apply:
- You or your spouse/common-law partner acquired a qualifying home.
- You are a first-time buyer. This means you did not live in another home owned by you or your spouse/common-law partner in the year of the acquisition of this home or in any of the four preceding years.
You are eligible to claim the Home Buyers’ amount if you are not a first-time homebuyer if the following apply:
- You qualify for the disability tax credit.
- You acquired the home to benefit a related person eligible for the disability tax credit.
- You must intend that you or a related person with a disability will occupy the home as a principal residence no later than one year after it is acquired.
Does My Home Qualify for the First-Time Home Buyers’ Tax Credit?
A qualifying home is a residential property that satisfies the following requirements:
- A home registered in your or your spouse’s/common-law partner’s name and located in Canada. This includes both existing homes and homes under construction.
- It is one of the following types of home:
- single-family houses
- semi-detached houses
- mobile homes
- condominium units
- apartments in duplexes, triplexes, fourplexes, or apartment buildings
- A share in a co-operative housing corporation that entitles you to own and gives you an equity interest in a housing unit located in Canada also qualifies.
Note: A share that only gives you the right to tenancy in the housing unit does not qualify for the Home Buyer’s Tax Credit (HBTC).
Claiming the Tax Credit for People With Disabilities
If you are eligible for the disability tax credit in the year the home was acquired, or you acquired the home for the benefit of someone related to you who is eligible, then you may qualify for the HBTC, even if you aren’t a first-time buyer.
There are a couple of stipulations:
- The purchase must be made to allow the person with the disability to live in a home that is more accessible or better suited to their needs.
- You must intend to occupy the home or that the related person with a disability occupy the home as a principal residence no later than one year after it is acquired.
To apply for the HBTC for people with disabilities, you or a related person must be eligible to receive the disability tax credit, then apply for the HBTC on line 31270 of your income tax return in the year you bought the home.
How Do I Calculate My First-Time Home Buyers’ Tax Credit?
The HBTC is calculated using the lowest personal income tax rate of 15%. This means if you are claiming the full $10,000 amount, you can calculate the rebate as follows:
$10,000 x 0.15 = $1,500
If you are splitting the credit with your spouse or common-law partner, you will claim a partial amount of $5,000 and can calculate the rebate as follows:
$5,000 x 0.15 = $750
How Do I Claim the First-Time Home Buyers’ Tax Credit?
To apply for the first-time home buyer’s tax credit, enter $10,000 on line 31270 of your income tax return if you are not splitting the amount with your spouse or common-law partner. (You and your spouse or common-law partner can split the claim, but the combined total cannot be more than $10,000).
If you use online tax software, you will answer yes to whether you have purchased a home as a first-time buyer in the tax year.
Keep all your supporting documents if the CRA needs to see them later.
You will need the paperwork from the home purchase as proof of qualifying purchase in case the CRA needs to verify.
If you are claiming the tax credit as a person with a disability or for a related person with a disability, the form T2201 must have been completed and approved for the Disability Tax Credit Certificate for the person to be eligible for the HBTC.
What Are the Benefits of the First-Time Home Buyers’ Tax Credit?
The HBTC has a few benefits, including:
- Easy to claim
- Provides a one-time tax credit at tax time, meaning you will reduce the amount you owe at tax time or get a refund
- The claim can be split between spouses or common-law partners
What Are the Cons of the First-Time Home Buyers’ Tax Credit?
The HBTC has a few downsides, including:
- Small claim amount calculated on the lowest personal tax rate of 15%
- You and your spouse/common-law partner must meet the eligibility criteria
- You may have to submit supporting documents to verify eligibility
What Other Tax Credits am I Eligible for?
There are a number of other tax credits and first-time home buyer incentives in Canada to help ease the financial pressures of being a first-time buyer. Maximize your savings by taking advantage of the many programs available for first-time buyers.
First-Time Homebuyer Incentive
The First-Time Homebuyer Incentive is a shared-equity mortgage with the Government of Canada, which helps homeowners make a larger down payment. The effect of the larger down payment (all other things remaining equal) means a smaller mortgage and, ultimately, lower monthly costs.
The First-Time Homebuyer Incentive offers homeowners one of the following:
- 5% or 10% for a first-time buyer’s purchase of a newly constructed home
- 5% for a first-time buyer’s purchase of a resale (existing) home
- 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home
Shared equity means the government shares in both the ups and downs of the property value, up to a maximum gain or loss of 8% per year (not compounded) on the incentive amount from the date of advance to the time of repayment. The incentive must be paid back in full after 25 years or when the home is sold.
Land Transfer Tax Rebate
In Ontario, British Columbia, and Prince Edward Island, first-time home buyers may be eligible for a refund of all or part of their Land Transfer Tax. A municipal land transfer tax rebate is also available for first-time homebuyers in Toronto.
Here’s a breakdown of each province and Toronto’s rebates as of 2023:
|Region||Maximum rebate||Maximum Property Value Covered||Partial refund available?|
|Ontario||$4,000||$368,333||Yes. The refund will be reduced if one (or more) purchasers are not first-time buyers. The refund will be proportional to the interest acquired in the home by the individual who qualifies for the refund.|
|British Columbia||$8,000||$500,000||Partial refund for homes valued between $500,000.01 – $524,999.99.
If not all purchasers qualify, the refund amount will be reduced by 50%.
|Prince Edward Island||$2,000||$200,000||No|
|Toronto||$4,475||$400,000||A partial refund is available if all purchasers do not qualify.|
GST/HST New Housing Rebate
The GST/HST New Housing Rebate provides a rebate on the federal portion of the Goods and Services Tax (GST) / Harmonized Sales Tax (HST) on newly built housing, which can help Canadians save thousands on the cost of a new-build home.
The new housing rebate is equal to the federal portion of 36% of the GST/HST that all buyers pay when buying a new home in Canada. This means the maximum rebate of $6,300 is valid on homes with a fair market value of $450,000 or less. Additional provincial rebates may be available for the provincial portion of the GST or HST, depending on the province you live in.
Home Buyers’ Plan
The Home Buyers’ Plan is a program that lets Canadians withdraw from a registered retirement savings plan (RRSP) to buy or build a qualifying home for themselves or a related person with a disability. The Home Buyers’ Plan (HBP) lets first-time home buyers borrow up to $35,000 from their RRSPs as a tax-free down payment.
If you’re purchasing with someone who is also a first-time home buyer, you can both access $35,000 from your RRSP for a combined total of $70,000. As the HBP is considered a loan, it must be repaid to your RRSP account in equal installments within 15 years, starting after the first 2 fiscal tax periods from the purchase date.
Frequently Asked Questions (FAQ)
How does my HBTC eligibility change if I’m buying a home with someone else?
If you are buying a home with someone else, you can choose to claim either the full amount of the HBTC or you can split the amount between you and your spouse/common-law partner.
If you are purchasing with someone who is not a spouse or common-law partner, It’s important to check the eligibility criteria for each grant and rebate available to ensure the eligibility criteria will be met, as well as to determine how the rebate can be claimed.
Does the tax credit affect my eligibility for the Home Buyers’ Plan?
The Home Buyers’ Tax Credit does not affect your eligibility for the Home Buyers’ Plan or any other rebates available to you as a first-time homebuyer. You can take advantage of all programs you are eligible for as a first-time buyer to maximize savings.
How is my HBTC amount affected if my province offers a similar credit?
Any provincial rebates on buying/building a newly built home are unaffected by the federal rebate. The federal rebate covers the federal portion of the GST or HST changed on your newly-built home, whereas the provincial rebate will cover part of the provincial portion of the GST or HST.
First-time buyers have a lot on their plate. With rising interest rates and the cost of housing at an all-time high in Canada, taking advantage of every possible tax credit, federal, and provincial program available is one way to offset the cost of living. When added up, first-time homebuyers can save thousands of dollars in taxes, and find more affordable ways to pay their down payments, and buy their first home.
At nesto, we believe in providing the best rates available to Canadians. We’re also here to help you navigate the process of buying a home and finding the best mortgage available. If you’re ready to start your journey to homeownership, give one of our trained advisors a call today.
Other articles in this guide: “First-Time Home Buyer Mortgage Guide”
- What is the RRSP Home Buyers’ Plan (HBP)?
- First-Time Home Buyer Land Transfer Tax Rebates Across Canada
- First-Time Home Buyer Programs in Canada
- First-Time Home Buyer Grants in Canada
- First-Time Home Buyer Loans in Canada
- Who Can Benefit From the Home Buyers’ Tax Credit (HBTC)?
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