Buying your first home is an exciting experience for Canadians. But, with high home prices and interest rates, owning a home is becoming more unattainable, especially for millennials. To make home ownership affordable for first-time buyers, the federal government introduced a first-time home buyers tax credit.
So, what exactly is this first-time home buyer tax credit? And how can you apply for this tax credit in Canada? To learn more, keep reading!
What is the first-time home buyers tax credit
The first-time home buyers tax credit, also known as the home buyers amount (HBA), is a non-refundable tax credit that allows home buyers to claim $10,000 on their taxes the year they purchased the home. The government will allow you to split the amount with common-law partners or spouses, but the combined total of your claims cannot exceed $10,000, which leads to a maximum credit of $1,500.
Should you owe less than $1,500 on your taxes for the year, you can reduce your taxes to $0. Keep in mind that because this is a non-refundable tax credit, you won't get an additional refund.
How to qualify for the first-time home buyers tax credit (HBTC)
It's important to note that this tax credit is not meant for everyone. To qualify for the first-time home buyer tax credit, you'll need to meet the following criteria put forth by the Canada Revenue Agency (CRA):
- You and your spouse or common-law partner purchased a qualifying home in Canada in 2024.
- You haven't owned a home in the previous four years or lived in a house owned by your spouse or common-law partner in the last four years.
What does qualifying homes mean?
As we mentioned, to qualify for the first-time home buyers tax credit in Canada, you'll need to have purchased a qualifying home. So, what exactly is a qualifying home? Here's what the CRA says:
- Single-family houses
- Semi-detached houses
- Townhouses
- Mobile homes
- Condo units
- Apartments in duplexes, triplexes, or apartment buildings
How do I claim the Home Buyers’ Tax Credit?
If you purchase a new home in 2024 or your common-law partner purchased a home next year, when you file your income tax return, you will be able to fill out Line 31270 and enter $10,000 on the home buyer's amount.
Other first-time homebuyers incentives in Canada
As we mentioned, purchasing a residential property for the first time in Canada is harder than it was years ago. That being said, there are other first-time home buyers incentives available:
Home buyers plan
The home buyers plan allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to buy an existing home or build a new one. It should be noted, however, that should you opt for this plan, you will need to pay back the money into your Registered Retirement Savings Plan within 15 years, with monthly payments beginning two years following the date of your withdrawal.
Tax-free first home savings account
Another benefit Canadians can take advantage of is the tax-free first-time home savings account. The tax-free savings account is similar to a normal TFSA. For example, any contribution you make will be tax-free, and the amount you withdraw from your account will not be tax-taxable.
Home accessibility tax credit
The home accessibility tax credit is a rebate meant to help make existing homes more accessible for those with disabilities. If you are a disabled person and receive the Disability Tax Credit, you'll be allowed to claim up to $20,000 in expenses for your property each year for home improvements that enhance your home’s accessibility. For example, if you or a person with a disability requires a wheelchair ramp to their qualifying home or mobile home or accessible washroom features, you can claim a refund on your taxes.
Land transfer tax rebate (British Columbia, Ontario, and Prince Edward Island)
If you live in any of these provinces, you may be eligible for the land transfer tax rebate. This rebate will depend on where you live. For example, first-time home buyers in British Columbia can apply for a land tax rebate of up to $8,000 on a maximum home purchase price of $500,000. In Ontario, first-time home buyers can get a maximum rebate of up to $4000 for a home purchase up to $368,333. Residents living on Prince Edward Island can receive a tax exemption of up to $2,000, with a maximum purchase price of $200,000.
Protect your first home with quality homeowners insurance
Once you've purchased your new home, it's essential that you protect your investment by purchasing home insurance. If you're new to this type of insurance, there are some common mistakes when buying home insurance that BrokerLink is here to help you avoid. Make sure to look for these aspects when buying a home insurance policy:
Property damage coverage
Home insurance is designed to safeguard your home's physical structure, including its walls, flooring, roof, appliances, personal possessions, and more, against covered risks. Fire damage, vandalism, storms, and damages caused by falling objects are all common risks covered by basic home insurance plans.
Third-party liability coverage
Third-party liability coverage is another important feature of homeowners insurance. The third-party liability section of your insurance covers you in the event that someone is hurt on your property or that you cause property damage to another person's property.
Under this insurance policy, you will not have to pay for any repairs, medical costs, or legal costs if you are sued by a third party for damages. As with vehicle insurance, you will be able to set your coverage limits depending on your specific needs.
Additional expenses
In the event that your residence is no longer safe to live in due to an insured event stated in your policy, this element of your home insurance will cover any extra living costs incurred while you are unable to reside in your home. This includes the cost of accommodations, meals, and any additional costs paid during this period.
Secondary structures
If you have a separate structure on your property, which might be a detached garage or shed, it will be protected in the event of damage caused by an insured danger listed in your insurance policy. Fire, storm damage, theft, vandalism, and other incidents are covered depending on your coverage and your insurance provider.
Make sure you understand the inclusions and exclusions of your home insurance before signing any contracts with your insurance company. You may be required to purchase additional policies depending on your unique circumstances and qualify for discounts. For more information on how you can invalidate home insurance policies, contact BrokerLink today.
Contact BrokerLink for house insurance today!
Whether you need advice about buying vs renting, have questions about water damage in your home, or want to know more about the average cost of home insurance for your new housing unit, look no further than BrokerLink.
With years of professional expertise helping those in Canada find high-quality home insurance, BrokerLink is here to make your insurance experience less stressful and more informative.
With locations across Canada, there's a chance BrokerLink is in your neighbourhood! To work with one of our experienced brokers, don't hesitate to visit us in person for a one-on-one meeting. If you aren't able to come into one of our offices, give us a call anytime during the week to speak with someone over the phone about all types of topics like what to consider when buying a home insurance policy and more! Alternatively, you can get a free, competitive insurance quote from the comfort of your own home by using our online quote tool!
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FAQs on Ontario's first-time home buyer tax credit
What is the difference between a refundable and a non-refundable tax credit?
The difference between a refundable and non-refundable credit is that a non-refundable credit is meant to reduce your tax payable to zero, meaning you won't receive a refund on your tax return. On the other hand, a refundable credit is designed to reduce the amount you may owe in taxes and give you a refund at the end.
For example, if you owed $500 on your taxes and received a credit of $750. Because the $750 works against your owed taxes, it brings it down to zero. But in this scenario, you won't get the remaining $250. With a refundable credit, you would receive the remaining $250 as a refund.
When did the first-time home buyer tax credit start?
The first-time home buyers tax credit and disability tax credit first came into effect in 2009 as an aspect of the Canada Economic Action Plan. The goal of the income tax credit is to assist first-time home buyers with related closing costs such as the land transfer tax, legal fees, and more.
What is the $10,000 tax credit for first-time home buyers in Canada?
If you purchase a home in any one of the provinces or territories, the first-time home buyers tax credit enables you to claim up to $10,000 on the income tax line with a maximum credit of up to $1,500.
Do first-time home buyers get a tax break in Ontario?
Yes, they do! A first-time home buyer living in Ontario is able to receive tax savings on their tax return from the same year they purchased their home. The same tax credit rules apply to those living in Ontario as they do to Canadians who are first-time home buyers living in other provinces or territories.
How much does home insurance cost?
The average home insurance cost will vary depending on numerous factors, like the unique characteristics of your home, where you're located, your deductible amount, and more. Before purchasing a home insurance policy, we recommend shopping around for the best deals. For assistance doing so, consider working with an insurance broker.
What does refinance your mortgage in Canada mean?
When you purchase a home, you'll likely need to take out a mortgage to pay the remaining amount owed on your property, minus your down payment. When you sign a mortgage contract, you lock in a certain interest rate for a specific length of time. However, during this period, if you want to refinance your mortgage, you can end your existing mortgage contract in order to secure another mortgage loan. With this new mortgage loan, you'll end up paying the remaining mortgage balance with your new loan.
If you have any questions, contact one of our local branches.
