Canadian Government Incentives for First-Time Home Buyers

The Canadian government offers several programs and incentives to assist homebuyers in achieving homeownership. Here's an overview of the key initiatives:

1. Home Buyers' Amount

First-time homebuyers may be eligible for a non-refundable tax credit of up to $1,500. This credit helps offset some of the initial costs associated with purchasing a home.

Action to take:

Enter $10,000 as home buyers' expense on Line 31270 of Income Tax return when you file your taxes for the year in which you bought your first home to claim a tax credit and receive $1,500.

Qualifying Criteria:

You (or your spouse or common-law partner) acquired a qualifying home

• You did not live in another home (inside or outside Canada) that you (or your spouse or common-law partner) owned in the year of acquisition or in any of the four preceding years (first-time home buyer) unless you are a person with a disability)

Only one of the spouses or common-law partners needs to meet both conditions to claim this amount.

2. GST/HST New Housing Rebate

Homebuyers may qualify for a rebate on a portion of the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) paid during the purchase of a newly built, pre construction or substantially renovated home. This rebate can reduce the overall tax burden associated with buying a home.

Maximum Rebate:

Federal - The new housing rebate is worth 36% of the GST or federal portion of the HST paid on a newly constructed home, up to a maximum of $6,300. The rebate is valid on homes that are considered fair to the market with a value of $450,000 or less.

Provincial - The maximum amount you can claim is $24,000. You may be able to claim this rebate even if the new home you’ve purchased is above the $450,000 fair market value threshold.

Action to take: To apply for the rebate, you will need to complete and submit a form from the government website within 2 years after the construction date.  On this form, you will need to provide information about yourself and your home.

If you’re claiming a rebate for a new home that you bought from a builder, you may be able to have the builder apply for the rebate on your behalf. The CRA will review your application and notify you of their decision. If you are approved for the rebate, you will receive a cheque in the mail. 

3. Home Buyers' Plan (HBP)

The HBP allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) to purchase or build a qualifying home:

• Withdrawal Limit: Up to $35,000 can be withdrawn tax-free.

• Increased Limit: Budget 2024 increased the withdrawal limit to $60,000 for withdrawals made after April 16, 2024.

• Repayment: Withdrawn amounts must be repaid into the RRSP within 15 years to avoid tax penalties.

  
  

Action to take: You have to fill out Form T1036, Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.

4. First Home Savings Account (FHSA)

Introduced to help Canadians save for their first home, the FHSA combines features of both RRSPs and Tax-Free Savings Accounts (TFSAs):

• Contribution Limits: Annual contributions of up to $8,000, with a lifetime limit of $40,000.

• Tax Advantages: Contributions are tax-deductible, and withdrawals (including investment income) are tax-free when used for a qualifying home purchase.

• Time Frame: Funds can be held in the FHSA for up to 15 years or until the end of the year you turn 71.

Action to take: Open FHSA account with your Bank or a self directed FHSA through Questrade or Wealthsimple. It is quick and easy.

5. Extended Mortgage Amortization for First-Time Homebuyers

To make monthly mortgage payments more affordable, the government has extended the maximum amortization period:

• New Builds: First-time homebuyers purchasing newly built homes can opt for a 30-year amortization period, effective August 1, 2024.

• Benefit: This extension lowers monthly payments, making homeownership more accessible.

6. Increased Cap on Insured Mortgages

To assist buyers in high-priced markets:

• New Cap: The cap on insured mortgages has been raised from $1 million to $1.5 million.

• Down Payment: Allows more buyers to purchase homes with a minimum 5% down payment.

These programs, along with provincial or territorial initiatives, aim to make homeownership more attainable for Canadians. Prospective homebuyers should consult with financial advisors and review eligibility criteria to determine the best options for their circumstances.

If you’re considering buying a home or have queries around the home buying process, then book a FREE consultation today to discuss all your home buying queries. 

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