FIRST-TIME HOME BUYER TAX CREDIT IN CANADA

HOW FIRST-TIME HOMEBUYER TAX CREDIT IN CANADA WORKS

Before delving into the broad topic of the first-time homebuyer tax credit in Canada, it is important to give a brief explanation of what tax credit means.

A tax credit is a form of reduction in the amount of tax a taxpayer owes to the federal and state governments. Generally, tax credits save the taxpayer more dollars than tax deductions as deductions will only reduce the amount of your tax base that should be subject to tax.

For instance, if your taxable income is $35,000, and you have been granted $10,000 deductions by the state government, this can only reduce your tax base to $25,000 therefore if the tax rate is 15% then you would save only $1,500 but if you receive a tax credit of $10,000 your savings would reduce your tax liability by $10,000.

WHAT IS THE FIRST-TIME HOMEBUYER TAX CREDIT?

The first-time homebuyer’s tax credit is a non-refundable income tax credit that was introduced by the Canadian government in 2009, it is available to all eligible taxpayers and residents of Canada who purchase a property that falls under the government’s guidelines.

The first-time homebuyer tax credit (HBTC) makes it less complicated for you to buy a home and it reduces your monthly mortgage payments. Just like every other incentive, the tax credit will serve as a motivation to own a home while you don’t have to break the bank or work for longer hours to get your dream home.

Tax credits can be used with other rebates and incentive schemes to provide a little financial support and to make first-time homeownership more economical.

ELIGIBILITY CRITERIA FOR A FIRST-TIME HOMEBUYER TAX CREDIT

You can claim up to $5,000 for the purchase of a qualifying home in the year if both of the following apply:

• You or your spouse or common-law partner acquired a qualifying home.
• The qualifying home must become your principal place of residence within one year after it’s constructed or bought.

ELIGIBILITY CRITERIA FOR A QUALIFIED HOME

Most homes in Canada qualify for the First-Time Home Buyer Tax Credit, but there are a few key points to note.

• A qualified home should either be a new or an existing construction located in Canada
• The building structure should either be a single-family structure, mobile home, semi-detached, duplex, triplex, townhouse, or condominium unit.
• The home is registered under your name or your partner’s name and is listed as your principal residence.