First-Time Home Buyers' Tax Credit (HBTC)
It allows first-time buyers to recover some of the costs associated with their purchase, such as legal fees, land transfer taxes, and home inspections.
For the 2022 and subsequent taxation years, the Budget proposes to increase the amount used to calculate the HBTC to $10,000, which would provide a tax credit of up to $1,500 to eligible home buyers.
In order to be eligible for the credit, you must meet certain requirements. First, for your property to qualify it must be a new or existing home in Canada. Virtually all types of homes (detached, semi-detached, mobile home, condo, etc.) are acceptable. You must have the intention of residing in the home within one year of purchase.
To claim the tax credit, it must be registered in your name or your spouse’s name. In addition, you can’t have owned a home within the prior four years or have lived in a home owned by your spouse within that same timeframe. Finally, you must have documentation of your purchase.
Find more information HERE.
Home Buyers' Plan (HBP)
The Home Buyers' Plan (HBP) is a program that allows you to withdraw up to $35,000 in a calendar year from your registered retirement savings plans (RRSPs). Normally, any amount you withdraw from your RRSP is considered taxable income. However, the government allows you to borrow up to $35,000 from your RRSP to help pay for your home as long as you qualify as a first-time buyer. In order to meet this requirement, you must not have purchased a home within the last four years or also not have lived in a home owned by your spouse during this time.
Importantly, any funds borrowed from your RRSP for your down payment must be repaid. Your repayment period starts the second year after the year you withdrew funds from your RRSP(s) for the HBP, and you have up to 15 years to make these payments. If both you and your partner are purchasing a home for the first time, you can each access $35,000, for a total of $70,000.
Budget 2019 extends access to the HBP in order to help Canadians maintain homeownership after the breakdown of a marriage or common-law partnership. Provided that you live separate and apart from your spouse or common-law partner for a period of at least 90 days as a result of a breakdown in your marriage or common-law partnership, you could take advantage of the plan. More info HERE.
CMHC Shared Equity Program
The Canada Mortgage and Housing Corporation (CMHC) will provide 5% of the cost of an existing home, or 10% of a new home for first-time buyers with the minimum 5% down for an insured mortgage.
This program is only available for purchase transactions where the borrower makes less than 20%, and pays the Mortgage Default Insurance Premium
The program helps with reducing the monthly mortgage payment, and it is not intended to help you qualify for a higher purchase price.
With the maximum allowable household income of $120,000, the top purchase price would be approximately $505,000 with 5% down, and about $565,000 for a 15% down payment.
If you are purchasing a home in Toronto, Vancouver, or Victoria, then the maximum allowable household income is $150,000
Your total borrowing (mortgage amount) is no more than 4 times your qualifying income (4.5 times if the home you are purchasing is in Toronto, Vancouver or Victoria).
You are required to pay the incentive back after 25 years or when you sell the home based on the property’s fair market value, whether it has increased or decreased in value. Read more info HERE.
Land Transfer Tax Rebate
Land Transfer Tax is payable on the closing date of your purchase, and is usually based on the selling price of the property.
In Ontario, the following calculations apply:
=> the first $55K at 0.5%
=> from $55K to $250K at 1%
=> the remaining up to $400K at 1.5%
=> and the remaining balance up to 2M at 2%
Since Jan 1st 2017 the balance greater than $2M is taxed 2.5%
Also, if the property is located in Toronto, then there is an additional municipal land transfer tax.
Fortunately, Ontario offers up to a maximum of $4,000.00 rebate to first time home buyers.
Toronto also offers a rebate to first time home buyers up to a maximum of $4,475.00 (which brings the max rebate to $8,475.00 if buying in Toronto).
First Home Savings Account (FHSA)
Coming as early as April 1, 2023 in Canada, giving first time home buyers the benefit of an RRSP and TFSA combined to help save for their first home.
Here are some of the benefits:
- Contributions are tax deductible
- Withdrawal to purchase a home is non-taxable
- Growth is tax free
- Max. $40,000 contribution room
- Max. $8000 contribution per year, beginning 2023, including carry forward amount (excess charged 1% penalty each month)
- Ex. $5000 contributed in 2023, max. allowed in 2024 would be $11,000 ($8000 plus $3000 carry forward)
- Like the TFSA, carry forwards only accumulate once the FHSA is opened.
- Must be min. 18 years old, max. 71 years old and Canadian resident
- Must not have owned a home in which they lived at during any part of the calendar year or any time in the previous 4 years.
- Can make the withdrawal within 30 days of moving in
- Can not use funds with a partner that is not a first time home buyer
- 15 years to grow and use funds for buying a first home
- Can hold multiple FHSA, total cannot exceed $40,000.
What Happens if you don’t use your FHSA?
- Withdraw your funds and pay tax at your applicable tax rate, or transfer to your RRSP or RRIF tax free and pay tax on withdrawal at retirement income tax rate
- Transferred funds do not reinstated the contribution room of the FHSA
- Transferred funds into an RRSP do not reduce contribution room, nor are they limited by their available contribution room.
Can you carry forward Undeducted Contributions?
- Yes, like an RRSP, you can carry forward indefinitely and deduct contributions in later tax years.
Read more info HERE.
GST/HST New Housing Rebate
While GST/HST isn’t charged on purchases of an existing property, newly built homes will have the tax levied on it.
If you’re buying a newly built home, you’ll need to pay HST or GST on top of the purchase price. You pay it for the same reason that you pay sales tax on almost everything else you buy. Whether you’ll pay GST or HST depends on your province, as will your final tax rate. But no matter where you live, you can qualify for one of two housing rebates.
If you paid the HST to buy, build, or substantially renovate a house located in Ontario you may be entitled to claim a provincial new housing rebate for some of the provincial part of the HST that you paid.
More info HERE.
Energy Efficient Housing
These rebates are available to all home buyers and kick in when the mortgage you have is insured by any of CMHC, Sagen (previously known as Genworth), or Canada Guaranty. High ratio mortgages are typically insured, as are some other types. This rebate provides a refund of up to 25% of the mortgage default insurance premium you paid.
So, if you bought a $400,000 home with only 5% down, you would have paid $16,000 in insurance premiums. Under the Energy-Efficient refund program, you could save $2,400 or even $4,000 off the premium you paid. If the home’s energy rating is between 82 and 85, you will earn a 15% refund. If the rating is between 86 and 100 (or R2000), your refund will be 25% of the premium paid.
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