Buying your first home is a dream come true for many Canadians. In 2009, The Canadian Government developed the first-time homebuyer’s tax credit to make that dream a little easier for many Canadians. If you are a prospective first-time home buyer in Canada, this article will give you the ins and outs of this tax credit that you could be eligible for.
The First-Time Home Buyer Tax Credit
The first-time homebuyer tax credit is a program by the Canadian federal government aimed at supporting eligible persons who are buying their first home. It is a non-refundable $5,000 tax credit that comes with a $750 total tax rebate. The government essentially reduces the tax bill of Canadians who buy their first home.
To qualify, first-time homebuyers only need to buy a qualifying property in Canada. Qualifying homes must meet the following requirements, which most properties in Canada will automatically. The qualifications for the property include the following:
- Must be a home for a single-family, semi-detached, townhouse, mobile home, or condo
- An existing or new construction home within Canada
- Must have moved into the home within a year of paying for it
- Must be named as your principal residence and registered under your name or your partner’s name, who must be a first-time homeowner
Am I eligible for the first-time homebuyer tax credit?
Having known what the first-time homebuyer tax credit is and the requirements a property must meet to qualify, how do you know if you are eligible for it? The good news is that you and your partner don’t have to both qualify for the tax credit, only one of you qualifying is enough.
- You or your partner must have bought a home that meets the requirements stated in the section above.
- You must not have owned or lived in another home within the last four years to the time you wish to apply for the tax credit
Please note that the qualifying rules may vary slightly by province, so you may qualify in one province if not in another.
How much is the first-time homebuyer tax credit?
The amount that you can claim for tax credit depends on the year you apply for it. It is generally calculated using the lowest personal income tax rate for the year, which is 15% in 2022. This rate is multiplied by the $5,000 non-refundable tax credit.
For 2022, the tax rebate is calculated as $5,000×15%, which is $750. The amount will be paid when you file your taxes next year.
How do I claim the first-time homebuyer tax credit?
If you meet the conditions for qualifying for the tax credit, you can claim it in line 31270 of Schedule 1 of your Federal Tax form, which was line 369 before the tax year of 2019. Please note that you and your partner can either agree on one of you claiming the full $5000 or two of you can claim it provided the total amount claimed does not exceed the $5000 cap.
People with disabilities who are claiming the Disability Tax Credit on their tax return can also claim the First-Time Home Buyers’ Tax Credit even if they owned a home before. If you fall into this category, you must be claiming your disability amount on your tax return within the same year that you buy the home to qualify for the first-time homebuyer tax credit.
In addition, the house must be tailored to your special needs depending on the disability. Most likely, this is to prove that the house is used as your primary place of residence, which is a condition for claiming the tax credit. Finally and like everyone else, you must occupy the house within one year of purchasing it.
You can claim the tax credit under this category if either you or your partner, friend or whomever you are buying the home with has a disability that the house can accommodate. You can claim the tax credit by filling out Form T2201, Disability Tax Credit Certificate, and be certified by a qualified medical practitioner as having severe and prolonged impairment.
How do I file for the first-time homebuyer tax credit for the first time?
Filing for the first-time homebuyer tax credit time depends on whether you are using tax software or you are filing the tax by hand. It is however generally simple and anyone can do it quite easily. If you are using an online tax software, simply answer “yes” when asked if you purchased a home for the first time in the particular year you are filing your taxes. If you are filing the taxes by hand, you will be required to fill in the CRA homebuyer’s amount on Line 31270 of your Schedule 1 which used to be line 369 as stated earlier. The CRA will take it from there and process your tax credit.
It is worthy of note that there are other first-time homebuyer rebates and incentives that those buying their first homes can claim. These include:
- The First-time homebuyer land transfer tax offers a full or partial land transfer tax rebate depending on the purchase location.
- GST/HST New Housing Rebate which entitles them to a provincial or federal tax rebate and
- RRSP homebuyer Plan allows eligible home buyers to borrow money from your RRSP towards the purchase of their first home.
There is also a variety of these incentives both at the federal and province level, so you will do well to check those available in your province too.