First-Time Home Buyers’ Tax Credit (HBTC)

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Did you know you can obtain some financial aid during tax season to help pay for some of these extra costs using the First-Time Home Buyers’ Tax Credit (HBTC)?

Purchasing a home is very expensive, and not just due to the down payment you must acquire and present to the lender before they issue you a mortgage. Numerous other expenses accompany a home purchase, such as legal fees, land transfer taxes, inspection fees, mortgage insurance, and moving costs. All these extra items can quickly add up, making the process that much more expensive.

Luckily, you can offset some of these expenses with the First-Time Home Buyers’ Tax Credit.

Key Takeaways

The First-Time Home Buyers’ Tax Credit is a non-refundable tax credit that first-time homebuyers can claim.
Canadians with disabilities who claim Disability Tax Credit may be able to claim the HBTC even if they are not purchasing their first home.
First-time home buyers will receive a $1,500 tax credit.
As of 2022, the First-Time Home Buyers’ Tax Credit increased from $750 to $1,500.

What Is The First-Time Home Buyers’ Tax Credit?

The First-Time Home Buyers’ Tax Credit is a non-refundable tax credit that you can claim on your tax return. The credit is meant to help offset some of the costs and debts associated with your home purchase. Introduced in 2019, the HBTC is available to all Canadians who qualify.

Houses Purchase In 2021 or Earlier

Canadians who purchased a home in 2021 or earlier can claim up to $5,000 for the purchase of a qualifying home. With the claim, you can get a tax credit of up to $750.

Houses Purchased In 2022 Or After

Canadians who purchased a home in 2022 or after will allow Canadians to claim up to $10,000 for the purchase of a qualifying home. This increase will let homeowners receive a tax credit of up to $1,500 instead of $750.

Are You Eligible For The First-Time Home Buyers’ Credit?

Since the First-Time Home Buyers’ Tax Credit was created to provide financial relief to those buying their first home, you must be deemed a first-time homebuyer to utilize it. There are two criteria you must meet:

The home you purchased qualifies.
You haven’t lived in another home you owned, or your partner owned in the same year, or the prior four years.

HBTC Eligibility Requirements For Those With A Disability

A special exception applies if you’re an individual with a disability who claims the Disability Tax Credit on their tax return: you qualify for the HBTC even if you’ve previously owned a home. To be eligible under this exemption, you must meet the following criteria:

You must claim the disability tax credit in the same year you purchased your home.
The home must accommodate your needs.
You have to move into your home within one year of purchasing it.

Types Of Homes Eligible For The First-Time Home Buyers’ Credit

Whether they’re existing properties or new constructions, most types of homes satisfy the eligibility requirement for the tax credit. These include:

Single-family houses
Townhouses
Semi-detached houses
Mobile homes
Condominium units
Apartments
A share in a housing cooperative (if you receive ownership of the property)

In addition, you must have moved into your home no later than one year after making the purchase, and you’ve designated the home as your primary residence. The home also must be registered in your name or your partner’s name.

Thinking of purchasing a house outside of Canada? Learn how to get a mortgage abroad.

How Do You Apply For The First-Time Home Buyers’ Tax Credit?

Claiming the HBTC is a simple process. When preparing your tax return, enter the amount of $10,000 on line 31270. The tax credit is calculated by multiplying the $10,000 amount by 15%, which translates to a tax credit of $1,500. You have the option to divide the tax credit between your return and your partner’s return, but the total amount claimed can’t exceed $10,000.

Note: If you purchased a home for the first time before 2022 you can claim up to $5,000 or a total tax credit of $750.

Additional Options To Help Cover Your Home Expenses

The good news, there are even more ways to help make homeownership just a little bit more affordable. Check out these programs.

Tax-Free First Home Savings Account (FSHA)

If you’re planning on buying a home in the future, you can use the First Home Savings Account to help you save for your home. You can contribute up to $40,000, with a yearly contribution cap of $8,000. With it, interest earned is protected from taxation and any contribution you make will reduce your taxable income.

Multigenerational Home Renovation Tax Credit

If you plan on adding a secondary suite to your home, you may be eligible for this tax credit. With it, you may be able to claim a 15% tax credit (up to $50,000 in eligible expenses).

Home Renovation Tax Credits

There are numerous federal and provincial home renovation tax credits available. This can help you save a lot of money while building the value of your home. You can also use the tax credit in conjunction with a personal loan. This can help you finance the renovations and spread the costs. If you plan on taking out a loan, be sure to check your credit score before applying. Your credit health can impact your ability to qualify for a loan, so it’s best to understand where you stand.

Land Transfer Tax Refunds For First-Time Homebuyers In Ontario

First-time home buyers in Ontario may be eligible to receive a refund of part or all of their land transfer tax. This is especially beneficial for Ontario residents as land transfer taxes in the province are high. To be eligible, you must be 18 years old and have never owned a property. The maximum refund is $4,000.

Additional Reading

Buying A Home? Don’t Forget To Budget For Closing Costs

Unconventional Tips For The First Time Homebuyer

What First-Time Buyers Worry About When Applying For a Mortgage

Final Thoughts

While there are many programs available for first-time homebuyers that can ease the financial burden associated with a home purchase, the First-Time Home Buyers’ Tax Credit is one of the simplest to understand and qualify for. As long as you meet the criteria, all you have to do is fill out one extra line on your tax return to get a hold of some easy money.

First-Time

Can I still use the Home Buyers Plan if I receive the First-Time Home Buyers’ Credit?

Yes, you can apply for the Home Buyers’ Plan and still claim the First-Time Home Buyers’ Tax Credit (HBTC). These are two different programs with different criteria and rules. The HBTC is a non-refundable tax credit claimed on your tax return. The Home Buyer’s Plan lets you withdraw funds from your RRSP to put toward a down payment on your first home.

If I’m buying a house with my spouse, can we both apply for the First-Time Home Buyers’ Credit?

You can split the HBTC with your spouse or common-law partner, the amount you claim cannot exceed $10,000. Or, one of you can claim the full amount on your income tax return.

What’s is the First-time homebuyer incentive?

The First-Time Home Buyer Incentive program is an initiative launched by the federal government to help Canadians purchase their first home. Under the program, the government directly contributes funds to qualified homebuyers to reduce their mortgage in exchange for equity in their home. However, do note that this program has been discontinued.

Sources

Mark Gregorski

Mark is a writer who specializes in writing content for companies in the financial services industry. He has written articles about personal finance, mortgages, and real estate and is passionate about educating people on how to make smart financial decisions. Mark graduated from the Northern Alberta Institute of Technology with a degree in finance and has more than ten years' experience as an accountant. Outside of writing, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.