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 daunting.
Luckily, you can offset some of these expenses with the First-Time Home Buyers’ Tax Credit.
What Is The First-Time Home Buyers’ Tax Credit?
The First-Time Home Buyers’ Tax Credit is a $5,000 non-refundable tax credit that you can claim on your tax return. The credit allows you to receive a tax rebate of $750, which can 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.
Note: The new 2022 federal budget has proposed to make new changes to the First-Time Home Buyers’ Tax Credit. It plans to double the tax credit amount from $5,000 to $10,000, which would allow Canadians to get a tax rebate of up to $1,500 instead of $750. This can be applied to all homes bought on or after January 01, 2022.
Check out these tax credits for parents.
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
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
Additional Options To Help Cover Your Home Expenses
- 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).
- Tax-Free First Home Savings Account – 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.
- 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 prior to applying. Your credit health can impact your ability to qualify for a loan, so it’s best to understand where you stand.
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
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 $5,000* on line 31270. The tax credit is calculated by multiplying the $5,000* amount by 15%, which translates to a reduction in your taxes of $750*. 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 $5,000*.
*Due to the proposed changes announced in the 2022 federal budget, the max amount you can claim is now $10,000 instead of $5,000, which results in a tax reduction of $1,500 instead of $750.
Additional Reading
First-Time Home Buyers' Tax Credit FAQs
Can I still use the Home Buyers Plan if I receive the First-Time Home Buyers’ Credit?
If I’m buying a house with my spouse, can we both apply for the First-Time Home Buyers’ Credit?
What’s the difference between the First-time homebuyer incentive and the First-Time Home Buyers’ Credit?
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.
