If you’re buying a home for the first time, Ontario has a number of first-time home buyer incentive programs. Here’s what you need to know:
The federal government’s Home Buyers’ Plan (HBP) is a program that allows first time home buyers to withdraw money from their registered retirement savings plan (RRSPs) to buy or build a qualifying home. This money is not taxed as income as it would normally be when you withdraw for an RRSP…but you do have to pay it back. You have 15 years to repay the money into your RRSP, starting two years after the initial withdrawal. The maximum you can withdraw from your RRSP to help fund your home purchase is $60,000.
For more info on the HBP, visit the CRA website.
When you buy a home in Ontario, you’ll have to pay land transfer tax when you take possession of the property – and if you’re buying in the City of Toronto, there’s also a second land transfer tax. Thankfully, the provincial and Toronto governments have first-time home buyer incentive programs related to land transfer tax.
The Ontario government incentivizes first-time home buyers by offering a refund on the land transfer tax in Ontario, up to a maximum of $4000.
If you are buying in the City of Toronto, Toronto has an additional Municipal Land Transfer Tax with an additional rebate for first-timers that maxes out at $4,475.
The costs associated with purchasing a home can be a particular burden for first-time home buyers, who must pay these costs on top of saving the money for a down payment. Closing costs include one-time items such as lawyer fees, HST (on newly constructed homes), and adjustments (e.g. taxes or utilities prepaid by the seller) that allow you to complete the house purchase.
The HBTC, sometimes called the Home Buyers’ Amount (HBA), is a non-refundable tax credit that eligible home buyers can claim in order to lower their income tax.
The Government of Canada introduced the HBTC in 2009, and modified it again in 2022 to raise the credit amount. The program was created in response to rising home prices with the intent to make buying a home more achievable in Canada.
The government calculates your tax credit using the lowest income tax rate (currently 15%) and then reduces what you owe in taxes by the resulting product.
The HBTC isn’t a tax refund, only a means to reduce your owed income tax. The tax credit can only be claimed for the tax year in which you purchased your home.
You can also split the tax credit with your spouse or common-law partner if you’re filing taxes separately.
As of 2022, qualifying home buyers can claim up to $10,000 on a home purchase. When you calculate 15% of a $10,000 claim, the result is the maximum tax credit of $1,500.
Note that the HBTC is a nonrefundable tax credit – the amount you’re credited can’t exceed what you owe in taxes for that year. In other words, qualifying homeowners who owe under $1,500 in taxes will only receive a credit for the amount they owe. For example, if you qualify for the HBTC and only owe $1,000 in taxes, you should receive a credit of $1,000. You won’t receive an additional $500 as a refund.
To qualify for the HBTC, you’ll need to satisfy these requirements:
You or your spouse/common-law partner purchased a qualifying home during the tax year for which you’re seeking the credit.
You haven’t lived in another home – in or outside of Canada – that you (or your spouse or common-law partner) owned within the last 4 years. This satisfies the requirement related to first-time homeownership.
Eligibility is different for persons with disabilities. You don’t have to be a first-time home buyer and can qualify if:
You’re eligible for a disability tax credit in the tax year you’re purchasing the home.
You’ve purchased the home on behalf of a disabled relative who qualifies for the Disability Tax Credit (DTC).
The purchased home provides the disabled person with greater accessibility.
The HBTC applies only to qualifying homes, which must be registered in either your name or that of your spouse or common-law partner. The home in question must be located in Canada and be your primary residence within 1 year of its purchase or construction.
Qualifying homes include:
Single-family homes
Semi-detached homes
Townhouses
Condominiums
Manufactured or mobile homes
Apartments (including those in duplexes, triplexes, fourplexes and apartment buildings)
Co-ops (if your share gives you equity interest in your unit; right-to-tenancy shares don’t qualify)
More details about Ontario’s First Time Home Buyer Tax Credit here
The Canada Mortgage and Housing Corporation helps Buyers by providing mortgage loan insurance so that a Buyer can buy a home sooner–with as little as 5% down payment.
More details about the CMHC insurance program: CMHC website
In effect as of April 1, 2023, the First Home Savings Account is intended to give prospective first-time buyers an additional way to save money for their downpayment, tax-free.