To help Canadians purchase their first home, the federal government passed a law in 2009 that created a first time home buyer tax credit. The First-Time Home Buyers’ Tax Credit (or HBTC for short) provides a tax break to those new to the homeownership club. If you’d like to take advantage of the HBTC and get even more money back through other programs (including some provincial programs you probably haven’t heard of), we’ve put together a comprehensive guide to the First Time Home Buyers’ Tax Credit across Canada. In this guide you’ll learn:

• What the HBTC is
• How much you can get
• Some potential drawbacks to keep in mind
• How you can qualify
• Provincial government programs and tax savings tools aimed at first-time home buyers (including extra money you may qualify for based on the province you live in)

Let’s jump in!

How Much Can I Get From the First Time Home Buyers’ Tax Credit?

We’ll mention the important part first: The First-Time Home Buyers’ Tax Credit ends up being equivalent to a $750 rebate on the income tax bill for most people.As you might guess when working with tax forms, the determination of the tax credit is not as simple as just writing $750 on your tax return.Instead, you’ll will be able to write off up to $5,000 of the cost of the home on your tax form. You’ll then apply the lowest federal income tax rate against that $5,000 to determine the tax credit amount that you’ll receive. For the past several years, the lowest Canadian federal tax rate is 15%, which results in the $750 tax credit.Outside of a strange circumstance, most people will receive the full $750 tax credit (unless multiple people are involved in the purchase, which we’ll explain in the next section).This means if you end up with a $500 tax bill before the tax credit is applied, you’ll actually receive a $250 refund.If you already would receive a refund on your taxes, when you apply this tax credit, you’ll receive an additional $750 on your refund amount. Not bad!Remember that the maximum amount of the rebate for any particular home is $750. So if you’re purchasing the home with your spouse or with friends, you’ll each be able to apply for the HBTC on your individual tax returns, but you’ll have to split up the $750 among yourselves. Unfortunately, you don’t each receive $750. The split can be done in any amount, so both people could receive the same amount ($375) or one person can receive $650 and the other can receive $100 if desired. One of the parties involved even can claim the entire $750, and the other people can receive $0. The people involved determine the spilt, as long as the total amount on all of the tax returns for a single property does not exceed $750.

Applying for the First Time Home Buyers’ Tax Credit

The Canada Revenue Agency says you should apply to receive the credit on the tax return that matches the year in which you purchase the property. So if you’re purchasing a home for the first time in the 2019 calendar year, you’ll claim the credit on your 2019 federal income tax return.If you purchase the home early in the 2019 calendar year before you file your taxes for the last tax year, unfortunately, you cannot take the credit on the last year tax forms. You’ll have to wait until you file your 2019 taxes. (Don’t forget!)The tax agency does not require that you file extra documents with your tax return to prove you purchased the home. However, you will need to have such documents available if requested later.When filling out your taxes, you’ll enter the amount of the claim on Line 369 of Schedule 1 of the federal tax return. Remember, you’ll first have to enter the $5,000 amount and then calculate the actual $750 credit off of that amount.

Qualifying for the First Time Home Buyers’ Tax Credit

Now for the tough part: How exactly do you qualify for this tax credit? Let’s start with the basic requirements.

• Location: You must purchase the home inside Canada, and you must be someone who files an income tax return in Canada.
• Type of Home: Many types of homes qualify, including single-family dwellings, as well as townhomes, mobile homes, condos, or apartments.
• Moving in: You must plan to move into and occupy the home within one year of the purchase date.
• Names on the Registration: You or your spouse (or legal partner) must have your names on the registration documents.

Most people will easily satisfy the first batch of requirements. Here are a few more stringent requirements that may eliminate some people from qualifying.

• Previous Homes: If you or your spouse or your common-law partner owned a home in the previous four years, you do not qualify for the tax credit.
• Living Arrangements: If you lived in a home that your spouse owned alone within the past four years, you cannot claim the credit on your own home or one you purchase with your spouse later.
• Co-Operative Housing: For those who live in co-operative housing, the qualification process can be confusing. If this is a co-operative where you have the ability to purchase an equity interest in the property, it qualifies for HBTC. If you only have a right to tenancy in the co-operative housing, however, it will not qualify.

The rules are slightly different for people who have disabilities. (If you can claim a disability amount on your income tax return, you are considered to have a disability for the HBTC as well.)

As long as the home has features that allow it to meet the needs of the disabled person, the home buyer does not have to be a first-time home purchaser to receive the tax credit. However, the disabled person must occupy the home within a year of finalizing the purchase.

Drawbacks of the First Time Home Buyers’ Tax Credit

As we mentioned earlier, the drawbacks to this credit are not exactly prominent. After all, the government is going to give you money for just a bit of paperwork, and that’s almost never a bad thing.

However, there are a few things you should know before you start making plans for using the money.

• Delayed Rebate: Don’t expect to receive a lower price on the home or to be handed a check for the HBTC at closing. This rebate comes back to you at the time you file your income tax form, so you might not receive the money for up to 16 months after you purchase the home.
• Confusing Rules: Before you count on the money, make sure you understand the rules we outlined earlier. Some of the rules will be confusing if you don’t have a traditional type of home purchase or if you are buying the home with friends. Should the tax rate bracket percentages change in the future, the amount of your tax credit will change too, which may confuse some people.
• No Tax Bill: If you’ve somehow purchased a home for the first time, but you don’t have any income that will be taxed at the federal level, you may not receive the tax credit. After all, you have to have some sort of taxable amount of income if you’re going to receive a credit for it. However, this situation is extremely rare for a home buyer.

How to Get More Money (Based on Your Province)

Here are some additional benefits you can receive as a first-time home buyer, depending on where you live.

Ontario First Time Home Buyers

When you pay land transfer tax on your home purchase, as a first-time home buyer in Ontario you will be eligible to receive a rebate on a portion of the amount up to $4,000. You cannot have owned property anywhere in the world previously to qualify. Another benefit for first-time home buyers occurs through the Ontario Home Ownership Savings Plan (OHOSP), which provides a tax break on the amount you’re saving as a down payment. You must meet certain household income limitations to qualify for this plan.

British Columbia First Time Home Buyers

?British Columbia residents who are buying a home for the first time will be able to apply for a rebate on some of the property transfer tax amount they must pay. To qualify for this credit in British Columbia, you must have never owned a property anywhere in the world previously, you must have lived in British Columbia for at least 12 months and/or you must have filed at least two tax returns in British Columbia in the past six years. British Columbia also offers a low-interest down payment loan for first-time home buyers through the BC Home Partnership Program, but it’s not accepting new applications at this time. Those interested in this program should monitor the web site for more information.

New Brunswick First Time Home Buyers

First-time home buyers in New Brunswick can apply to the Home Ownership Program to receive a low-interest or no-interest loan for up to half of their home’s purchase price. 

The interest rate on this loan depends on the applicant’s total household income, and the interest rate is applied on a sliding scale.

Newfoundland and Labrador First Time Home Buyers

Those purchasing a home for the first time in Newfoundland or Labrador who meet income guidelines can receive an interest-free loan for up to 5% of the home’s purchase price under the Down Payment Assistance Program (DAP). Limitations exist for the total household income of the applicant, as well as for the purchase price of the home. The program uses a sliding scale of the amount the first-time homeowner can borrow, depending on the household income amount. Newfoundland also has a First-Time Homebuyers Program (FHP) to provide assistance to first-time home purchasers, based on income and home price limitations. At the time of this writing, DAP and FHP are closed to new applications, but visitors can check back with the web site for more information.

Northwest Territories First Time Home Buyers

Residents in the Northwest Territories can apply for the Homeownership Entry Level Program (HELP), which allows first-time home buyers to start out receiving subsidized rent on a home. Over time, they’re then offered incentives to purchase the property. Eligibility restrictions apply for first-time home buyers looking to use HELP.

Nova Scotia First Time Home Buyers

The provincial Nova Scotia government offers the Down Payment Assistance Program (DPAP) for first-time, low-income home buyers. DPAP gives Nova Scotia residents an interest-free loan for up to 5% of the home’s purchase price that can be paid back over a 10-year period. 

Home price and personal household income limits apply, and applicants must have lived in Nova Scotia for at least 12 months before purchasing their first home.

Nunavut First Time Home Buyers

First-time home buyers who meet income limitation guidelines can use the Nunavut Down Payment Assistance Program (NDAP) to gain additional down payment funding to meet the demands of lending institutions. 

The home buyer must have 2.5% of the down payment amount, and the NDAP will help with additional funding. The NDAP can be repaid over a 10-year period. (Some non-first-time home buyers may also qualify for this program.)

Prince Edward Island First Time Home Buyers

Residents of Prince Edward Island are able to qualify for a rebate on a portion of the land transfer tax when they purchase a home for the first time. 

Applicants must have lived in Prince Edward Island for at least six months or have filed at least two tax returns in the past six years in the province.

Yukon First Time Home Buyers

In the Yukon, low-income first-time home buyers who have at least a 2.5% down payment amount can potentially qualify for programs that assist with obtaining a low-interest mortgage loan or with obtaining additional funds for a down payment, such as the First Mortgage Program and the Down Payment Assistance Program. If you’re building your first home from scratch, the Yukon has the Owner Build Program that can help you obtain mortgage financing.Land transfer tax amounts depend on the province in which the home resides. Some provinces don’t have a land transfer tax, but you may have to pay title transfer fees. Additionally, some cities will apply a land transfer tax that’s separate from what the province applies.

Other First Time Home Buyers’ Programs

Beyond the programs we’ve already mentioned, Canadians have a few other programs and benefits exclusively available when purchasing a home for the first time.

Toronto City Residents

First-time home buyers in the city of Toronto can receive a rebate on a portion of the municipal land transfer tax they’re required to pay up to $4,475.

This rebate applies to homes, condos, or townhomes. This amount is in addition to the amount that the provincial government of Ontario provides. Several other municipalities and local governments in Ontario offer assistance for first-time home buyers too.

Tax-Free Loan

If you need to borrow from your RRSP (Registered Retirement Savings Plan) to obtain money for the down payment on a first home, you can borrow up to $25,000 through the Home Buyers’ Plan (HBP). (If two people are purchasing the home together, they each can borrow money for a total of $50,000 available.) You will have to repay the money back into your RRSP, but you can make these payments over a 15-year period, so this is a great way to find the money for a down payment for first-time home buyers. As long as you make the required payments, you do not have to pay any interest, penalties, or taxes on this money.

Mortgage Rebates

As banks compete for your mortgage loan, some of them offer one-time rebates to first-time home buyers. The amounts of the rebates vary by banking institution and by the amount you’ll be borrowing as part of the mortgage. Shop around for your mortgage to determine what rebates and other benefits are available from the lending institutions.The good news is none of these other first-time home buyer programs and benefits excludes you from using the First-Time Home Buyers’ Tax Credit. You can use more than one program, as long as you qualify. These incentives can be a big help to the first-time home buyer, so consider all of your options for assistance when deciding whether purchasing a new home is a good idea for you!