Purchasing a home can be intimidating since it consists of so many essential steps as a first-time homebuyer. From filing income taxes to inspection fees to legal expenses to land transfer taxes, there are plenty of things that go hand in hand in the home-purchasing procedure. If you’re a first-time home buyer, here is everything you need to know about it.
Purchasing a home can be really expensive which is why most people get scared. It is not just about finding the right home and lender but managing down payment and giving it to the lender before they provide you with a loan, it all takes a lot of money and time investment. The expense doesn’t end at the down payment, there are plenty of other things for which you need money such as moving costs, land transfer tax, mortgage insurance, inspection fees, and legal fees. All these extra amounts add up and make the procedure of home purchasing intimidating and hectic.
But don’t worry, if you’re planning to buy your first home in Canada, there are plenty of plans that help by providing financial aid during tax season. These financial programs such as the First-time home buyer’s tax credit help you to make the first home buying procedure easy.
If you’ve started investing to become a homeowner for the first time, there are certain government inducements such as first-time homebuyer tax benefits and first-time homebuyer credit (also known as HBTC) that make the procedure easier for you. HBTC is a small refund that can help home buyers to recover the cost they have to spend on buying a home.
If you’re new to this, read this article to understand essential things that a first-time homebuyer should know.
What is the First-Time Home Buyers’ Tax Credit?
The tax breaks for first-time homebuyers 2020 is a non-refundable tax credit amount of $5000. If you claim this credit, it will help in a tax deduction for first-time homebuyers by $750. This amount is indeed not big but as a first-time homebuyer, you can use it for many other things. This is one of the first-time homebuyer tax benefits that was presented in 2009 and is accessible for all taxpayers of Canada.
Who can claim the First-Time Home Buyers’ Tax Credit?
There is a particular list for Canadians represented by CRA (Canada Revenue Agency) to check if they can claim the tax credit benefit or not:
- You must be a permanent resident or Canadian Citizen.
- You must have lived in the area for a year before making a purchase.
- You don’t have a previously owned home anywhere in the world.
- You and your partner bought a qualified home.
Does my home qualify?
Here are things you need to cross-check to identify whether your home qualifies or not.
- You have shifted to the house within one year of purchasing it.
- It should be a condo, townhouse, single-family, mobile home, or semi-detached.
- The house is listed as the owner’s principal residence and is registered under the name of the owner. The property should be 0.5 hectares or smaller and have a market value of $500,000 or less. And, if the property is newly built then it has a market value of $750,000 or less.
- It should be either new construction or an existing house situated in Canada.
How do I claim the First-Time Home Buyer’s Tax Credit?
You can claim a first-time home buyer’s tax credit with online applications like TurboTax or wealth simple. It is a simple process that requires you to type “yes” to the application’s question about whether or not you have purchased this house as a first-time homeowner in this tax year. If you’re filing income taxes yourself, you need to fill the CRA, amount of $5000 on line 31270 of your schedule 1. The rest will be handled by the CRA, you don’t need to do anything.
What are the other tax credits in Canada I am qualified for?
If you have claimed the first-time home buyer’s tax credit, you can still eligible to apply for the variety of other first-time home buyer’s programs that includes:
1. GST/HST New housing Refund
While purchasing the house, you have paid HST and GST, you may be eligible to get a refund from the provincial or federal government.
2. Land transfer tax refund
Some municipalities and cities provide a refund to help first-time house buyers counterpose of the amount of their land transfer tax.
3. First-time homebuyer incentive
This national plan aims to help first-time house buyers by paying ten percent of their home’s cost in a collective equity loan. Under this scheme, the government of Canada will become co-owner of your house. It is, indeed, a complex plan which is why you should research and educate yourself well before applying.
4. Home buyer’s plan
The national government lets you withdraw more than $35,000 from your RRSP to pay the first down payment of your first home.
First time Home buyer’s Program FAQs
1. What is the difference between first-time homebuyer credit and first-time home buyer’s incentive?
The first-time home buyer’s credit lets homeowners save their money by crediting their cash through a tax rebate You as a home-buyer don’t have to pay it back and available for everyone who bought their first home under terms and conditions. Whereas, the first-time homebuyer incentive program is launched by the Government of Canada on 2019, September 2 to assist people to buy their first home. Under this program, the qualified home-buyers will benefit from the Canadian government through funds to lessen their debt in exchange for equity of the home. In the first-time homebuyer incentive program, you will be able to get ten percent of the home’s purchasing amount.
2. Can I still get benefited from the home buyer’s plan after receiving the first-time home buyer’s credit?
Home buyer’s plan and tax deduction for first-time homebuyers are two different programs. You can apply for a home buyer’s plan and still claim for the tax credit. The first-time homebuyer tax credit is a non-refundable amount appealed on your tax return. Whereas, the home buyer’s plan allows you to withdraw the amount from RRSP to pay the first down payment of your house. You are allowed to use both programs concurrently.
3. Can I and My spouse both be eligible to apply for the First-time home buyer’s credit?
No, the first-time home buyer’s tax credit can only be claimed by one individual. If you have already claimed the credit on your tax return, your spouse can’t claim for the same program and amount. You can, however, free to split the credit tax amount with your spouse.
While there are multiple financial aid programs available for first-time homebuyers that can make the home-buying procedure less hectic, the First-Time Home Buyers’ Tax Credit is one of the best and easy to qualify for. All you need to check is the eligibility criteria and fill one line on the tax return form to get money. The first-time home buyer’s tax credit can help owners to a good amount that they can use anywhere. However, if you want to save money, check programs like HBTC or money-saving tools.