There is little doubt Canada is one of the most expensive places in the world. As well as the high cost of living, it has some of the most lavish real estate prices anywhere on the planet. The situation has become acutely worse following the Covid pandemic, with the cost of buying a home now at an all-time high. Luckily, some forms of help are available for those seeking to buy a property. One of these is the First-Time Home Buyers’ Tax Credit (HBTC), which we’ll discuss in this article.
An Introduction To The First-Time Home Buyers’ Tax Credit (HBTC)
The First Time Home Buyers’ Tax Credit came into existence in 2009 to help the first time home buyer. The program aims to help pay for the closing costs of purchasing a home, such as land transfer taxes, legal expenses, and inspections. As a tax credit arrangement, the scheme does not provide a lump cash sum to the applicant. The amount is taken from a person’s tax bill such that their tax amount is reduced.
From the time the scheme began to 2022, the First Time Home Buyers’ Tax Credit was around CA$ 750. However, following the 2022 budget, the tax relief was doubled to CA$ 1,500.
After a person buys their first home, they can apply for the tax credit. However, they must claim within 12 months of buying the home. If a home is purchased with someone else, such as a partner or spouse, the combined application cannot exceed CA$ 1,500.
Additionally, the home must meet the qualifying requirements set out below. Given that the scheme has been running since 2009, and the Canadian government increased the tax credit recently, the scheme is expected to continue to operate for many years.
The First-Time Home Buyers’ Tax Credit For Disabled People
When it comes to the First-Time Home Buyers’ Tax Credit, a disabled person is defined as someone who can claim the disability tax credit during the year the home is purchased.
A disabled person does not need to be a first-time buyer to become eligible for the scheme. They simply need to buy a home suited to their demands, and the place of residence must become occupied within 12 months of the sale completion.
The Qualifying Requirements
To be eligible for this tax credit scheme, the home must meet these requirements:
- Must be located within Canada,
- Can be a newly built or an existing home,
- The property could be a condo or apartment, a single, a mobile, a townhouse, or a semi-detached house,
- The owner must be intending to live in the home within 12 months of purchase,
- Can include an equity share through the Co-op Housing Federation, offering you possession of the property.
A homebuyer wishing to use the First-Time Home Buyers’ Tax Credit (HBTC), must satisfy these requisites:
- You, your partner, or spouse must purchase a qualifying new home,
- The registration must be in your name or that of the partner or spouse,
- You must not have been a homeowner in the previous 4 years,
- In the last 4 years, you must not have lived in a home owned by your spouse or partner,
How To Apply For The First-Time Home Buyers’ Tax Credit
Through the First-Time Home Buyers’ Tax Credit, the applicant(s) can claim 15% of their tax rate to gain a relief of CA$ 1,500. In a joint application, 50% is awarded to one person, with the remainder to the other party.
The application process for the HBTC is straightforward, and there is no need to complete complex application forms or obtain approval from any governing body. To receive the tax relief, when completing the annual income tax return, you simply have to enter CA$ 10,000 on Line 31270 for the Home Buyer’s Amount. HBTC will reduce the tax bill by CA$ 1,500. If the tax burden is less than CA$ 1,500, the tax bill becomes reduced to zero as the tax credit is non-refundable.
Canada Revenue Agency (CRA) is responsible for the administration of income tax. If you wish to learn more about filing an income tax return and the cost, validity, and processing times involved, read this article here.
Other Help Available For First-Time Buyers
In addition to HBTC, other forms of help are available to first-time home buyers. These include The GST/HST New Housing Rebate, The First-Time Home Buyer Incentive, and The Home Buyers’ Plan. Such schemes offer a combination of rebates and loans to help first-time buyers get on the property ladder. If you are a first-time property buyer, these schemes should also be looked into.
Helping First-Time Buyers
Real estate in some parts of Canada is among the costliest anywhere in the world, and for first-time buyers, making a home purchase is not easy. To make things less challenging, schemes such as the HBTC are in place to ease the financial burden. If you are about to buy your first piece of real estate in Canada, it’s advisable to take advantage of all the schemes on offer to help and assist.