Purchasing your first home is an exciting milestone in any person’s life. However, it can also be an expensive one. Given the recent rise of home prices in the GTA, especially in cities such as Toronto, it’s normal to feel stressed by all the expenses. Luckily, the government offers programs, such as the First-Time Home Buyer’s Tax Credit (HBTC), to offer relief and make your journey more affordable.
The HBTC is a non-refundable tax credit that allows home buyers to claim an amount up to $10,000 on their tax return. This is done the year they purchase their home. The maximum tax credit that one may receive is $1,500. Let’s take a closer look at the First-Time Home Buyer’s Tax Credit and how it can assist you in purchasing your first home!
What is the First-Time Home Buyer’s Tax Credit?
Do you find yourself struggling to purchase your first home? You aren’t alone. Many Canadians are finding it difficult in this economy to take the step towards buying a home of their own. The First-Time Home Buyer’s Tax Credit makes it easier for taxpayers to make their home ownership dreams come to life.
This is done by allowing eligible people to claim a $10,000 non-refundable income tax credit. The HBTC was first introduced in 2009, and at first, allowed home buyers to claim an amount of $5,000. However, this was doubled to $10,000 in 2022.
The HBTC is calculated by applying the lowest personal income tax rate of 15% to the $10,000. This means you will get a non-refundable tax credit of $1,500. If you owe, this can assist you in bringing down the tax payable to zero.
Does My Home Qualify for the HBTC?
Curious as to whether or not your home qualifies for the HBTC? Luckily, qualifications for the First-Time Home Buyer’s Tax Credit are pretty simple. Qualifying homes must be located in Canada and registered in either your name or your spouse/common-law partner’s name. This includes both existing homes and those under construction.
According to the Canada Revenue Agency, the following homes qualify for the First-Time Home Buyer’s Tax Credit:
- Single-family homes
- Semi-detached homes
- Townhouses
- Mobile homes
- Condo units
- Apartments in duplex, triplex, fourplex, or apartment buildings
- Shares in a housing cooperative, if you are given ownership of the underlying property
Am I Eligible for the First-Time Home Buyer’s Tax Credit?
To qualify for the HBTC, you must either be a first-time homeowner or a person with a disability. To qualify as a first-time home buyer, you’ll have to meet the CRA’s criteria:
- You or your partner must have bought a home that qualifies
- You haven’t lived in a home that was owned by yourself or your partner in the last 4 years.
If you are applying as a disabled person, there is also a criterion that should be met. According to the CRA, to qualify for HBTC, you must meet the following requirements:
- You are eligible for the Disability Tax Credit (DTC) in the year you purchase your home. This means that you or your dependent has a serious and prolonged physical or mental impairment that has been certified by a medical professional. In other words, you generally must experience difficulties in performing activities of daily living. This could be walking, eating, hearing, or speaking.
- You are purchasing a home for the benefit of someone eligible for the DTC. They must be connected by blood, marriage, common-law partnership, or adoption.
- The home purchased is to enable the disabled person to live in a safe and comfortable home.
- The disabled person must occupy the home as their primary place of residence.
Can This Credit Be Split Between Two People?
Yes, the First-Time Home Buyer’s Tax Credit can be split between two people! The second person, however, must be a common-law partner or spouse. It is important to keep in mind that the combined total cannot exceed $10,000.
If you’re looking to claim the HBTC as a couple, you should first make sure that your spouse, who is claiming it, pays at least $1,500 in federal income tax. If they don’t, the credit won’t be fully paid out. When neither spouse pays $1,500 in federal income tax, then they should split the credit so that the amount returned is maximized.
First-Time Home Buyer’s Tax Credit: How To Claim
If you meet all of the above qualifications and are looking to claim the First-Time Home Buyer’s Tax Credit, the steps are simple! To claim, enter the amount of $10,000 on line 31270 of your tax return. Alternatively, divide the credit between your return and your spouse’s return. As mentioned above, the combined total claimed mustn’t be greater than $10,000.
If you are claiming the HBTC for a home that you purchased for a disabled relative, enter the amount on the same line of your tax return. On some occasions, the CRA may contact you and ask about your relationship to the disabled person.
Final Thoughts
Purchasing a home in this day in age can be a challenge. However, with the First-Time Home Buyer’s Tax Credit, you can have peace of mind knowing you have assistance. Remember, no home is truly safe without the proper home insurance. If you’re in the market, don’t hesitate to reach out to us at isure! Contact us or request a quote today!
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