First-time Home Buyer Freebies

by RateHub.ca

Purchasing a home is expensive so any opportunity to regain some of your money should be taken advantage of. For first-time home buyers, there are some options available so make sure you familiarize yourself with these rebates before settling into your new home.

1. First-Time Home Buyer Tax Credit (HBTC)

This is a non-refundable credit issued by the Government of Canada amounting to $750 which is intended to help the buyer recover the cost of closing fees. If you are purchasing a home under co-ownership, the maximum tax credit is still $750 combined. The credit must be included in your personal tax return under “line 369” within a year of purchasing the property.

What are the requirements?

• The property must be a qualifying home*

• You must not have owned a home as a primary residence in last four years

• The home must be registered in your name (or your spouse’s)

*A qualifying home must be located in Canada, whether it is an existing or pre-construction property, which may be a single, semi, town home, mobile home, condo, as well as a multi-person dwelling. In addition, you must intend to occupy the home.

Special notes: If the total of your tax credit is greater than your federal income tax, you will not receive the HBTC.

2. The RRSP Home Buyer’s Plan (HBP)

This plan allows first-time buyers to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP) completely tax free. This is a great option for two reasons:

i. The contributions you make to your RRSP are tax-deductible, which helps keep your tax statement in your favour (i.e. It could help reduce the amount owed or increase your tax return).

ii. The withdrawal from your RRSP is analogous to an interest-free loan; after all, you are taking out your money.

However, you must repay the full amount within 15 years time, starting no later than two years after the withdrawal of the funds.

What are the requirements?
 

• You must not have owned a home as a principal place of residence, four years prior to the withdrawal

• Intend to live in the purchased property within one year of closing

• If you have used the HBP before, there must not be any outstanding balance

In order to apply for the Home Buyer’s Plan, visit Canada Revenue Agency and print a copy of Form T1036. Section 1 can be filled out by you, however, you will need your financial institution (that holds your RRSP) to fill out Section 2. In your income tax return for the year, you will have to reference the T4RSP from that your financial institution will send you.

3. Land Transfer Tax Rebate

This only applies to the provinces of Ontario, British Columbia, and Prince Edward Island. Also, it’s important to note that Toronto is the only city with a Land Transfer Tax at the municipal level, so likewise, to offset the large tax, a Land Transfer Tax rebate is also available for the City of Toronto in addition to the Province of Ontario. Each province listed above sets their criteria and calculations themselves.

To show you the variance between each region, take a look at our chart below.

For a $200,000 mortgage:

For a $500,000 mortgage:

*The City of Toronto Land Transfer tax is calculated independently from the Province of Ontario so you are made accountable to both if you live in Toronto. So although your amount due for a $500,000 mortgage is $0 in Toronto, you must still pay the $4475 Ontario Land Transfer Tax.

This article was provided by Ratehub.ca.