Buying your first home can be an expensive business so when the government tells us about a first time home buyer credit this is good news!
For the past few years the Government of Canada has had the First Time Home Buyers Tax Credit in place to give an extra helping hand to anyone who wants to buy their first home. Of course, buying a home is expensive for anyone, whether it’s your first or your tenth, but the assumption is that someone who’s buying their first home could do with a little extra help towards buying furniture or appliances, as they’re less likely to already have all these things.
Saving for a down payment, legal fees, land transfer costs, and more, can be difficult for a first time home buyer so by getting a tax credit – money off your federal tax bill – you don’t have quite so much to worry about.
How Does the First Time Home Buyer Credit Work?
The first time home buyer tax credit isn’t going to make you rich, but every little bit helps, right?! Basically, you can get up to $750 in federal tax relief and this is calculated based on an amount of $5,000 multiplied by the lowest personal income tax rate (which is currently 15%).
There are certain conditions that have to be met in order to qualify. Of course, you have to be a first time home buyer – this means you cannot have owned a home in any of the four years preceding your purchase of this home. If you owned a home five years ago that’s okay, for the purpose of this tax credit you are considered a first time home buyer.
The other condition is that you are buying a qualifying home. Now don’t worry, this doesn't mean the government has to come and approve the home you’re buying! Essentially nearly all homes sold today will be ‘qualifying homes’ – it has to be in Canada and it includes homes that are already built and those that are being constructed. It can be a detached, single family home, a semi-detached home, townhouse, condo unit, apartment, or mobile home. You may also qualify if purchasing a share in a co-operative housing corporation ‘that entitles you to possess, and gives you an equity interest in, a housing unit located in Canada’. The only time this will not apply is if you are buying a share that only gives you a right in tenancy in the housing unit.
The final condition is that you must intend to occupy the home as a principal place of residence no later than one year after you buy it.
So you see, the conditions you need to meet in order to receive the first time home buyer credit really aren't that bad!
Claiming the First Time Home Buyers Tax Credit
Now you’ve figured out that you can claim it, how do you make that claim? It’s very easy – there’s actually a line especially for the HBTC on your tax return. Line 369 of your Schedule 1 is the one you need to complete.
Before you do that you need to be aware that the maximum claim amount (which is the $5,000 figure that your tax credit is based upon) is a total for the purchase of that home. So if you and your spouse are buying a home together, or you’re buying it with a friend, the total between all purchasers cannot exceed $5,000. So you could claim the whole $5,000 yourself, or you may decide it needs to be split evenly so your return will show an amount of $2,500 and so will your co-owners. Then both of you will receive a first time home buyers credit of $375 (15% of $2,500).
The final thing to know is that you can make the claim in the taxation year in which the home was purchased – you don’t need to wait before you make the claim. So what are you waiting for?!
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