How the First-Time Home Buyers’ Tax Credit Canada Works
Find out more about the eligibility and benefits of this federal government assistance program.
By Emily Southey | 5 minute read
The Home Buyers’ Tax Credit (HBTC), also referred to as the Home Buyers’ Amount, is a federal government assistance program intended to make homeownership more accessible to Canadians. Specifically, the incentive is designed to help first-time homebuyers purchase homes by allowing them to claim a $5,000 non-refundable income tax credit. But how exactly does the First-Time Home Buyers’ Tax Credit work and how can you take advantage of it? These are the questions we answer below.
What Is the First-Time Home Buyers’ Tax Credit?
This tax credit is one of several assistance programs launched by the federal government of Canada to help Canadians purchase their first-ever homes. It functions as a tax rebate, in which eligible first-time homebuyers can claim up to $5,000 on a qualifying home, resulting in a tax rebate of up to $750. While a $750 rebate might not sound like much, it can make buying your first home a little easier.
Eligibility Guidelines for the First-Time Home Buyers’ Tax Credit3
Not all Canadian taxpayers are eligible for the First-Time HBTC. To claim this credit, you must meet the following eligibility guidelines:
- You buy a qualifying home registered in your (or your spouse’s or common-law partner’s) name. The home can be an existing property or a pre-construction home and includes all kinds of properties, including single-family structures, townhouses, condominium units, and more;
- You are a first-time homeowner. This means that you did not live in a property that you or your spouse or common-law partner owned in the past four years; and
- You are buying a qualifying home that will become your principal place of residence and you plan to live in the home within one year of buying it or one year of construction being completed (in the event you’re buying a pre-construction home).
Qualifying Home Defined
“Qualifying home” is an important term, and one used frequently throughout the Government of Canada’s Home Buyers’ Tax Credit web page. What is a qualifying home, you may be wondering? We define it below.
To be considered a qualifying home, the property must be registered in your or your spouse’s or common-law partner’s name in accordance with the applicable land registration system in your province or municipality. The property must be located in Canada. Qualifying homes include resale (existing) houses, as well as homes under construction, and many types of homes.
The following types of properties may be considered qualifying homes:
- Single-family houses
- Semi-detached houses
- Mobile homes
- Condominium units
- Apartments in duplexes, triplexes, fourplexes, or apartment buildings
How Can You Claim the First-Time Home Buyers’ Tax Credit?
Claiming the First-Time HBTC is relatively straightforward. You do not need to apply or be approved for anything. Rather, if you are eligible, you simply put the HBTC amount of $5,000 on Line 31270 of your income tax return. From there, you can sit back, relax, and let the Canada Revenue Agency (CRA) take care of the rest.
Alternatively, if you are filing your income tax return using online software like Turbotax or Wealthsimple Tax, all you have to do is answer “yes” to their questions about whether you purchased a home for the first time in the tax year.
Please note that the Government of Canada allows eligible taxpayers to split the First-Time Home Buyers’ Tax Credit with their spouse or common-law partner. However, the combined total claims cannot exceed $5,000. The $5,000 credit results in a $750 rebate on the taxes you owe that year. If you owe less than $750 in taxes, you can only reduce your taxes to $0. There is no additional refund, as it is a non-refundable tax credit.
Finally, remember to keep a record of your home purchase in case the CRA requires proof of your eligibility down the line.
The Future of Canada’s First-Time Home Buyers’ Tax Credit
There might be good news on the horizon! When the federal government released its 2022 budget proposal this past spring, it included a plan to double the First-Time Home Buyers’ Tax Credit from $5,000 up to $10,000. This would bring the non-refundable tax rebate up from $750 to $1,500.
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Frequently Asked Questions
Does Buying a House Affect Your Tax Return In Canada?
This depends on whether the house you’re buying is eligible for the First-Time Home Buyers’ Tax Credit. If you are a first-time homebuyer who purchases a qualifying home, then you can claim the HBTC, which will affect your income tax return. Specifically, you can claim up to $5,000, which will result in a rebate of up to $750.
How Does the First-Time Home Buyers' Tax Credit Work?
To claim this tax credit, you simply put $5,000 on Line 31270 of your income tax return.
How Do I Know If I Qualify As a First-Time Home Buyer?
You can find out if you qualify for the First-Time Home Buyers’ Tax Credit by visiting the Government of Canada’s Home Buyers’ amount web page. However, you should be eligible so long as you or your partner bought a qualifying home, the home will be your principal place of residence, and you haven’t lived in another home you own or that your partner owned in the past four years.
Can the First-Time HBTC Be Claimed Twice on the Same Home (for example, by Me and My Spouse or Common Law Partner)?
The First-Time Home Buyers’ Tax Credit can only be claimed once per home. That means if you’re buying a home with someone else, such as a spouse or common-law partner, or buying a home with a joint mortgage, you can only claim the tax credit once. That said, you can choose how you claim the credit, as the government allows the credit to be split between partners. For example, you could claim the full $5,000 yourself while your partner claims nothing. Or you could each claim half. Depending on how much tax each of you pays and owes, there could be an advantage if one of you claims instead of the other. Regardless of how you choose to split the tax credit, your total claims cannot exceed $5,000, which means the largest rebate you will receive is $750.
How Much Do I Get Back in Taxes for the First-Time Home Buyers’ Tax Credit In Canada?
The maximum amount you can get back in taxes when claiming the First-Time HBTC is $750.
Does the First-Time HBTC Affect My Eligibility for the Home Buyers' Plan?
The First-Time Home Buyers’ Tax Credit is a completely different program than the Home Buyers’ Plan, and therefore your eligibility for one will not affect your eligibility for the other.
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