The First-time Home Buyer Tax Credit was introduced as part of ‘Canada’s Economic Action Plan’ to assist Canadians in purchasing their first home. It is designed to help recover closing costs such as legal expenses, inspections, and land transfer taxes.
The Home Buyer Tax Credit, at current taxation rates, works out to a maximum rebate of $1,500 for first-time buyers. After you buy your first home, the credit must be claimed within the year of purchase and it is non-refundable. In addition, the home you purchase must be a ‘qualified’ home, described in more detail below. If you are purchasing a home with a spouse, partner or friend, the combined claim cannot exceed $1,500.
When it comes time to do your taxes, enter the Home Buyer's Amount of $10,000 on Line 31270 of your income tax return. The Government allows you to split the amount with your spouse or common-law partner, but your combined total claims must not exceed $10,000. The credit results in a $1,500 rebate on the taxes you owe the next year.
The amount is calculated at the lowest personal tax rate, which is presently 15%.
If you owe less than $1,500 in taxes for the year, you can only reduce your taxes to $0. You won't get an additional refund as this is a non-refundable tax credit. Be sure to keep all your home buying documentation in case the CRA requires proof of eligibility.
How do you qualify for the First-time Home Buyer Tax Credit?
In order to be eligible for the First-time Home Buyer Tax Credit, you must meet the following requirements:
- Be within Canada
- Be an existing or new home
- Be a single, semi, townhouse, mobile home, condo, or apartment
- Can include a share in a co-operative housing corporation that gives you possession of the home
In order to be eligible for the First-time Home Buyer Tax Credit, your home must meet the following requirements:
- You must intend to occupy the home within one year of purchase
- You or your spouse must purchase a qualifying home
- The home must be registered in either your name or your spouse’s name
- You cannot have owned a home in the previous four years
- You cannot have lived in a home owned by your spouse in the previous four years
- You must present documents supporting the purchase of the home