First-Time Home Buyer Incentives in Ontario

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:

1. Home Buyer Plan for First-Time Home Buyers (HBP)

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.

Some things to know about the first-time buyer RRSP Plan in Ontario:

  • The home must be a principal residence (meaning you are living there vs. renting it out)
  • You can take the cash out of your RRSP up to 30 days after buying the home
  • If you withdraw from your RRSP before closing on your new home, you must own or build the home by October 1st of the following year.

Qualifying as a first-time home buyer for the RRSP Plan:

  • The Canadian government defines a first-time buyer as someone who has not owned a home that they occupied as their principal place of residence during the period beginning January 1st of the fourth year before the year of withdrawal and ending 31 days before your withdrawal.
  • So basically, if you owned and sold a home five years ago, or had a property that wasn’t your principal residence, you are still considered a first-time homebuyer.

For more info on the HBP, visit the CRA website.

2. Land Transfer Tax Refunds for First Time Home Buyers

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.

Ontario Land Transfer Tax Refund

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.

To qualify for the land transfer tax refund:

  • You must never have owned a home ever, anywhere
  • If the person you are buying a home with has owned a home before, the amount of the refund will be reduced

City of Toronto Land Transfer Tax Refund for First-Time Buyers

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.

Land Transfer Tax Calculator

3. First Time Home Buyer Tax Credit (HBTC)

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.

What Is The First-Time Home Buyers’ Tax Credit?

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.

How The First-Time Home Buyers’ Tax Credit Works

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.

How Much Can You Claim With The First-Time Home Buyers’ Tax Credit?

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.

Who Qualifies For The First-Time Home Buyers’ Tax Credit?

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.

What Properties Are Eligible For The HBTC?

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

4. Canada Mortgage and Housing Corporation Insurance (CMHC)

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

5. First Home Savings Account (FHSA)

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.

  • Prospective homebuyers can contribute up to $8,000 of tax-free savings each year
  • There’s a lifetime contribution limit of $40,000
  • If you don’t contribute the full amount each year, you’re allowed to carry forward a maximum of $8,000 to use the following year. 
  • The First Home Savings Account has a maximum participation period of 15 years, so you have to transfer the money and close the account 15 years after opening it to avoid being taxed. 
  • The home must be a principal residence – the FHSA cannot be used to purchase an investment property.
  • You must move into the home within one year of purchasing it
  • If you need access to the funds for any reason other than buying a first home, you’ll be taxed on the withdrawals.
This website may only be used by consumers that have a bona fide interest in the purchase, sale, or lease of real estate of the type being offered via the website. The data relating to real estate on this website comes in part from the MLS® Reciprocity program of the PropTx MLS®. The data is deemed reliable but is not guaranteed to be accurate.