Buying your first home is often the largest financial commitment you will have made and just coming up with the down payment is a difficult task for many! Then there are the legal fees, property transfer fees, disbursements and all those other costs that can really add up, creating a huge dent in your finances!
To help offset these costs for first time home buyers, the Federal Government created the First Time Home Buyers Tax Credit (HBTC) to assist home buyers with the costs associated with purchasing their home.
Who is Eligible?
The HBTC applies to first time homebuyers who intend to occupy the home as their principal residence no later than one year after acquisition. To be considered, a first time home buyer, neither the individual nor the individual’s spouse or common law partner will have owned another home in the year of the home purchase or in the four preceding calendar years.
Special rules apply for the purchase of homes that are more accessible or better suited to the personal needs and care of an individual who is eligible for the Disability Tax Credit. In these cases, the HBTC can be claimed even if the first time homebuyer criteria is not met.
How Much is the Tax Credit?
The $5,000 non-refundable tax credit provides up to $750 of federal tax relief. It is based on a down payment of $5,000 and is calculated by multiplying the lowest personal income tax rate (15%) x $5,000 = $750.
The individual’s spouse or common law partner may claim any unused portion of an individuals HBTC. When two or more eligible individuals jointly purchase the home, the credit may be shared but cannot exceed $750.
If only one individual is eligible to claim the tax credit, the percentage of that individuals ownership of the home can be used. ie. 50% of $750= $375
Also note, it is up to the applicant to ensure that they can provide documentation for the purchase transaction and that they meet the applicable eligibility requirements, should the CRA require proof.
For more information, you can visit the Department of Finance Canada website.
As Toronto Mortgage Broker, I am always happy to provide advice and help you with the financing of your first home!
