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