Buying a house may be both exhilarating and daunting. Regardless of your financial status, purchasing a new house is a significant financial investment. Buying a house can be an exciting time in one’s life. You need to have enough money for a down payment, closing costs, and moving expenses to get the process started. The Government of Canada offers a variety of financial incentives to assist you with your house purchase. There are incentives for first-time purchasers and tax credits, rebates, and other schemes. In addition, the Canada Revenue Agency has devised a method for Canadians who have recently purchased their first home to obtain some money back on their taxes.
You can claim up to $5,000 on your taxes this year if you acquired a new home in 2021 and did not live in a dwelling owned by you (or your spouse/common-law partner) for the previous year or four years.
What Is the Home Buyers’ Tax Credit?
The Home Buyers’ Tax Credit, often known as the Home Buyers‘ Amount, is a federal government program that helps some Canadians achieve homeownership. A $5,000 non-refundable income tax credit is available to qualifying first-time homebuyers under the scheme, and the total practically equals a $750 tax refund.
If both of the following apply, you can claim up to $5,000 for the purchase of an eligible home throughout the year:
- You (or your spouse or common-law partner) bought a qualifying house
- You did not live in another home owned by you (or your spouse or common-law partner) in the year of the purchase or any of the four years before that (first-time home buyer)
What Is the Eligibility?
A qualifying residence must be registered in your name, your spouse’s name, or your common-law partner’s name, and it must be located in Canada, according to the applicable land registration system. Existing homes, as well as those under development, are included.
The following are examples of qualified residences:
- single-family houses
- semi-detached houses
- mobile homes
- condominium units
- apartments in duplexes, triplexes, fourplexes, or apartment buildings
To be eligible for the Home Buyers’ Tax Credit, you (or your spouse or common-law partner) must meet the following requirements:
- Purchase a qualifying house in your name (or your spouse or common-law partner). It might be an existing property or one that is currently being built, and it can comprise single-family homes, townhouses, condo units, and more.
- It would help if you were a first-time homebuyer, which means you or your spouse or common-law partner did not own a home in the preceding four years.
- It must become your primary residence within one year of purchasing or constructing the eligible property.
Some exceptions include qualifying persons with disabilities who can apply for the tax credit even if they are not first-time home buyers.
What Kind of Residences Are not Eligible for the Tax Credit?
A stake in a co-operative housing corporation that offers you the right to own and an equity interest in a housing unit in Canada also qualifies. A stake that solely grants you the right to tenancy in a housing unit, on the other hand, does not qualify. You must intend to occupy the house as a significant place of residence or have a connected person with a disability occupy the home within one year of its acquisition.
How to Apply?
If you are not splitting the money with your spouse or common-law partner, enter $5,000 on line 31270 of your return. The claim can be shared between you and your husband or common-law partner, but the total amount cannot exceed $5,000. When more than one individual is eligible for the money (for example, when two persons buy a house together), all claims cannot exceed $5,000. Supporting documents must be kept handy in case the Canada revenue agency cross-checks. You need to have enough money for a down payment, closing costs, and moving expenses to get the process started
How Does this Credit Work?
There is no need to apply or be approved to claim the Home Buyers’ Tax Credit. Add the $5,000 Home Buyer’s Allowance on Line 31270 of your tax return when filing your taxes. The government permits you to split the money with your husband or common-law partner, but the total sum of your claims cannot exceed $5,000. The credit entitles you to a $750 refund on your unpaid taxes for the year. (The figure is based on the lowest personal income tax rate, now 15%.) Because this is a non-refundable tax credit, if you owe less than $750 in taxes for the year, you can only lower your taxes to $0 – you won’t get a refund. Keep all of your home-buying papers if the CRA asks to confirm your credit eligibility. You can either fill electronically or a paper return.
Home Buyers’ Tax Credit for Disabled People
If the following applies to you, you do not have to be a first-time homebuyer:
You qualify for the disability tax credit because you bought the house for the benefit of a family member who qualifies for the credit. The acquisition must be made to enable the disabled person to live in a house that is more accessible or better suited to their requirements. A person with a disability for the home buyers’ amount is someone qualified for the disability tax credit for the year in which the home is purchased. You must intend to occupy the house as a significant place of residence or have a connected person with a disability occupy the home within one year of its acquisition.
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