Even though there are warnings galore about the amount of debt taken on by Canadian households, our Provincial and Federal governments seem to think that mortgages aren’t a bad thing and continue to offer a number of incentives available to first time buyers. One of these is the First Time Home Buyers’ tax credit offered by the Federal government, marketed towards first-time home buyers and equates to $750 reduction in taxes payable should you owe any.
Qualifying for the credit is fairly straightforward; you must purchase a qualifying home in the year you are claiming the credit and meet the definition of a first-time home buyer. This latter part is deceiving because you don’t have to actually be a first time home buyer; as long as you did not live in another home owned by you or your spouse in the four years leading up to the year of acquisition, you are considered a first time home buyer. Anyone relocating for work or giving up ownership for a period of four years or more can qualify when they reenter the residential real estate market.
The term “qualifying home” is fairly broad and includes most, if not all, types of housing one could imagine. It’s important to note that the credit is not multiplied, meaning that it must be split between spouses or co-owners. Further, the house must be registered with the land registration system where the home is located.
Other home buyer incentives include the Home Buyers Plan which allows for a tax free withdrawal from RRSPs, the Ontario first-time homebuyers tax rebate which reduces the land transfer tax applicable on purchase, and the GST/HST New Housing Rebate (only on new homes up to a certain dollar value).
If you are planning to save up for your first home purchase, check out our blog post on Maximizing the Home Buyers Plan for further tips and understanding. The Canada Revenue Agency also has this FAQ page dedicated to the Home Buyer’s credit, and as always, feel free to contact our firm should you have any unanswered questions.
This blog post was written by Geoff Smethurst CPA, CGA, LPA