Tax Matters: First-Time Home Buyers’ Tax Credit

Did you know that as a first-time home buyer you can claim $5,000 for the purchase of a qualifying home  and if you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years?

What is First-Time Home Buyers’ Tax Credit (HBTC)
First-Time Home Buyers’ Tax Credit is a non-refundable tax credit that was enacted as part of the 2009 Federal Budget, based on an amount of $5,000 for first-time home buyers who acquire a qualifying home after January 27, 2009. The home is considered to be acquired once it is registered in your name in accordance with the land registration system or other similar system applicable where it is located (in Canada). The year of acquisition is the year in which the tax credit can be claimed. If you missed claiming this credit in the year of purchase, you can file an adjustment to your tax return.

How do you qualify for the tax credit?
You, and anyone you purchase the home with, must be considered a first time home buyer to be eligible for the tax credit. The home must be used as your principle residence, and if you purchase with your spouse, common-law partner, or even a friend, then either one of you can claim the credit (or share it). However, the combined total cannot exceed $750.

If you are a person with a disability or are buying a house for a related person with a disability, you do not have to be a first time home buyer.  You qualify if the home you’re moving into is better suited to meet the needs of the person with the disability. The person with the disability must occupy the home as a principal residence no later than one year after it is purchased.

Note that if a home is gifted to a person, as long as all other requirements are met, the person can still qualify for the home buyers’ tax credit. The person who gifted the home is deemed to have disposed of it, and may have to report a capital gain.

To be eligible for this credit, you must not have lived in another home owned by you or your spouse or common-law partner in the calendar year of the home purchase or in any of the four preceding calendar years.

What is a qualifying home?
A qualifying home is a housing unit located in Canada acquired after January 27, 2009. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings all qualify. A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in, a housing unit located in Canada also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

How is the HBTC calculated?
The HBTC is calculated by multiplying the lowest personal income tax rate for the year by $5,000. If for example the lowest tax bracket is 15%, your tax credit for the year will be $5000 x 15% = $750.

How do you claim the HBTC?
To claim the Home Buyers’ Tax Credit, enter the amount of $5000 on Schedule 1 line 369 of your tax return. Beginning with the 2009 personal income tax return, line 369 was incorporated into the Schedule 1, Federal Tax to allow you to claim the credit in the year in which you acquired the qualifying home.

You do not have to submit any supporting documents with your income tax return. However, you must ensure that this information is available, should it be requested by the Canada Revenue Agency (CRA).

Sidenote: My favourite tax return software
If you do your own taxes I highly recommend using SimpleTax a Free Tax Return Software. I used it for the first time and I was absolutely blown away by how simple, fast and easy to use it. I completed filing my taxes in less than half hour! and in less than 2 weeks, I received my tax refund! Easy-breezy! It was my best tax experience ever! I highly recommend it. Check it out at: https://simpletax.ca/ 

Be a good citizen. File your tax returns.

By Terry Mutuku

Government of Canada
RBC Royalbank
SimpleTax Software

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