Tax benefits of first-time homebuyers

Still hesitating to become a homeowner? Tax credits and incentive programs for those who want to buy a home may convince you to take the plunge. 

Why buy a house? To build your wealth!

Buying a property has many advantages. In many cases, it is a way to safely invest your money and significantly increase your assets. As a general rule, the value of a normally maintained property will increase significantly over the years, making it easier to plan for retirement.

Also, if you have trouble putting money aside for personal savings (TFSA, RRSP or non-registered account), buying a home and making regular payments will help you build a nice nest egg.

The HBP (Homeownership Plan):  

Would you like to have more money for your down payment, transfer taxes (welcome tax), notary fees, new furniture, etc.? With the HBP, if you or your spouse or common-law partner are Canadian residents, you can withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) at the time of your first home purchase, tax-free. A couple could get a total of $70,000.

However, the amount withdrawn from your RRSP must be repaid gradually, over a maximum period of 15 years. 

Note that if you have not lived in a home that you or your common-law partner or spouse owned during the past four years, you are also considered a first-time home buyer.

For more information on the HBP, visit this page.

The First-Time Homebuyers’ Tax Credit (HBTC): its benefits and eligibility requirements

When purchasing a property, you may be eligible for the First-Time Homebuyer’s Tax Credit (FTHC) if:

  • you are a first-time homeowner (first-time buyer) or you have not resided in a home you owned in the year of purchase or in the 4 previous years;

  • you did not reside in a home owned by your spouse or common-law partner in the year you purchased the property or in the 4 previous years;

  • your application is for one of the following eligible dwellings:

  • single-family home;

  • semi-detached house (semi-detached);

  • townhouse (city house);

  • mobile home;

  • condominiums;

  • apartment in a duplex, triplex, quadruplex or apartment building. 

The $5,000 credit is a $750 tax refund, which can be allocated to one person or divided between two co-owners. 

Why $750? Because the refund amount is calculated based on the lowest tax rate of 15% that the Canada Revenue Agency uses to multiply the $5,000 credit. 

The CIAPH: more flexible conditions for people with disabilities

Persons with disabilities and their common-law partners or spouses may also be eligible for the $5,000 First-Time Home Buyers’ Tax Credit (HBTC) (i.e., a $750 tax refund given to one person or divided between two co-owners).

If this is the case, you will be eligible even if this is not your first property, you or your spouse owned a home in the year of purchase or in the four previous years, or you lived in a home that your spouse owned in the year of purchase or in the four previous years.

All Quebecers and Canadians who benefit from the Disability Tax Credit are entitled to the HBTC, as well as their common-law partners or spouses at the time of purchase of a qualifying home. 

The Home Affordability Tax Credit (HATC)

If you purchase a property in Quebec or elsewhere in Canada and wish to renovate it to improve its accessibility and/or make it safer for an eligible person, you may be able to realize tax savings of up to $10,000 per year through the Home Accessibility Tax Credit. Note that you may also be able to benefit from this credit by renovating your existing home. 

Those eligible for this credit are:

  • Specified individuals (i.e., individuals who qualify for the disability tax credit or those who are 65 years of age or older at the end of the year);

  • Eligible individuals (the spouse or common-law partner or a family member of the specified individual – more details here)

Moving Expenses for Work or Education Deduction 

If you are moving more than 40 km from your current home to be closer to your workplace or new job, start a new business, or go to school full-time, you may be able to take advantage of significant deductions on your moving expenses. Here are some examples:

  • Transportation and storage costs for furniture (movers, towing, temporary storage and insurance).
  • Travel expenses (car, meals and lodging during the trip).
  • Legal fees.
  • Real estate brokerage fees.

These fees could be considered as eligible expenses on your income tax return and could save you significant amounts of money in taxes for the year in question.

Deductions for home office expenses

Homeowners who telecommute (employees or self-employed) can take advantage of deductions for many home-related expenses, including mortgage interest, home insurance, municipal and school taxes and more. 

Partial refund of sales taxes (GST/QST)

When you purchase a new home, you will receive a partial GST/QST rebate (just over half of the 5% GST and 9.975% QST), which will be deducted directly from the final price.

This rebate also applies to existing homes that have been substantially renovated (at least 90% of the interior of the home in question must have been removed and/or replaced).

Homeowners wishing to build a new home can also take advantage of this partial rebate of the GST and QST on the cost of materials, equipment and labour, under certain conditions.