First Time Home Buyer’s Guide
Posted May 28th 2020
First-Time Home Buyers’ Tax Credit
The Home Buyers’ Tax Credit works out to a rebate of $750 for all 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. If you are purchasing a home with a spouse, partner or friend, the combined claim cannot exceed $750. This tax credit can help recover closing costs such as legal expenses, inspections, and land transfer taxes.
Land Transfer Tax Rebate
First-time homebuyers in Ontario can qualify for a rebate equal to the full amount of their land transfer tax, up to a maximum of $4,000. Based on the Ontario land transfer tax rates, the rebate will cover the full tax amount up to a maximum home purchase price of $368,333. For homes with purchase prices over $368,333, homebuyers will qualify for the maximum rebate, but will still owe the remainder of their land transfer tax. If you are buying your home with your spouse, but only one of you qualifies for this rebate, you can still receive 50% of the rebate
Home Buyer’s Plan
To help you come up with a down payment, you may be eligible for the Home Buyers’ Plan (HBP). The Home Buyers’ Plan allows you to withdraw up to $35,000, tax-free, from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home. If you’re purchasing with someone who is also a first time homebuyer, you can both access $35,000 from your RRSP for a combined total of $70,000. You have up to 15 years to repay the amounts you withdrew.
First-time homebuyer eligibility
In order to be eligible as a first-time homebuyer, you must meet the following criteria:
- RRSP funds you borrow must be in your account for at least 90 days prior to withdrawal
- You cannot have owned a home within the previous four years
- If you’re buying with a spouse (or common law partner) who is not a first time homebuyer, you cannot have lived in a house they owned for 4 years
- You have entered into a written agreement to buy or build a qualifying home
- You mush intend to live in the home within one year of purchase as your primary residence
- If you have used the Home Buyers’ Plan before, you cannot have any outstanding balance due
- You must be a Canadian resident
- You can withdraw a single amount or make a series of withdrawals in the same calendar year.
Benefits of the Home Buyer’s Plan
- Your RRSP can act as a savings account that gains interest
- As you can only take withdraw money from your RRSP for the purchase of a home without being penalized, it can be a great incentive to not spend the other elsewhere.
- Your RRSP acts as a tax deferral, so if you are in a high income job, you can save at tax time
If you are a first time home buyer and would like more information, contact a member of The Baird Team today!