First-time home buyers need to deal with several things when it comes to buying a property in Ontario. Of all the factors out there, they should have proper knowledge of the taxes. Individuals need to bear transfer tax. However, first-time home buyers are eligible for a complete or partial refund of the tax.
In this article, we will look at the various tax concessions available to new home buyers. Meanwhile, if you are looking for affordable living in Canada, visit this website.
Tax credit for Home Buyers – Detailed overview
Eligible first-time home buyers can claim a non-refundable income tax credit (on their qualifying home) valuing around $5,000. It adds to a tax rebate of $750.
Claiming tax credit is an easy process as you do not need to get any approval for the claim if you are eligible for the credit. When filing an income tax return, you may mention $5,000 on Line 31270.
As per the government rules, individuals can split this amount with their common-law partner or spouse, but the net claim shouldn’t be more than $5,000. Individuals benefit from a $750 rebate with this credit on the taxes they owe annually. (Low personal tax rate is calculated, which is currently 15%).
First-time home buyers purchasing a property with a friend, spouse, or partner, the total claim can’t be more than $750. For receiving this claim, individuals need to include it in their tax returns (line 369). In case you owe any amount lesser than $750 for a given taxation period, you may reduce the taxes to $0.
All the home buying documentation should be kept ready when applying for a tax credit, as the CRA needs eligibility proof for releasing the credit.
Eligibility for a tax credit
The individuals (you or your spouse) should meet the following criteria to claim Home Buyers’ tax credit:
- For claiming the refund, the minimum age requirement of an individual is 18 years.
- The home must be registered either in your name or in the name of your common-law partner or spouse. It could be either an under construction or existing property, including townhouses, single-family structures, condo units, etc.
- The applicant should be a first-time homeowner. In other words, neither you nor your co-property owner should have owned any home previously. Individuals with previous ownership don’t qualify for tax credit refunds available for first-time home buyers.
- The qualifying residence should become the principal residential place within a year of its purchase or construction.
General rules and regulations for Land transfer tax
Land transfer tax is applicable on all land conveyances in Ontario. A refund is payable for the complete or partial tax to the first‑time home buyers for the following agreements:
- Sale and purchase done prior to December 14, 2007. Note that a refund is applicable on the purchase of a home that is newly built.
- Sale and purchase done post-December 13, 2007. It applies to all home constructions, whether they are newly built or up for resale.
The taxpayers that qualify for tax credit claim are eligible for a refund immediately for property registration in the following conditions:
- They apply and register for the claim electronically. The statement is completed under the explanation tab of the land transfer tax affidavit.
- The property is registered by filing an affidavit for Ontario Land Transfer Tax Refund for the individuals’ who purchase the form for the first time.
If the applicant claims the refund at the time of registration, it may equalize the payable land transfer tax. In cases where a refund isn’t claimed at the time of registration, individuals need to pay the tax and claim their refund from the Ministry of Finance. Note that no interest is paid on the amount of refund.
For dispositions or conveyances’ occurring prior to January 1, 2017, the refund value is a maximum of $2,000.
Starting from January 1, 2017, the upper limit of the refund value is revised to $4,000. This limit applies only to dispositions or conveyances occurring after or on January 1, 2017, irrespective of the agreement date of sale and purchase was signed.
Starting from January 1, 2017, first‑time purchasers need not pay any land transfer tax if they qualify for the first $368,000 value of their “eligible home.”
Other tax credits for first-time home buyers
First-time home buyers who receive the tax credit on their purchase may apply for several other grants and credits. They are eligible for the following benefits:
Incentive for First-time home buyer
It’s a federal government incentive aimed at helping first-time home buyers where the government pays 10% of the home’s cost in the form of a shared equity loan. However, as per the rules, the government becomes the home’s co-owner. It’s a complex scheme; hence it is recommended to keep all the factors in mind before signing up for it.
New Housing Rebate GST/HST
Individuals who pay HST or GST when buying their home may get a rebate from the provincial or federal government.
Tax Rebates on Land transfer
Some municipalities and cities offer a rebate for helping first-time home buyers for offsetting the land transfer tax cost.
Plan for Home Buyers
The federal government allows home buyers to borrow a sum amounting to $35,000 from their RRSP for purchasing their first home.
Tax credits for first-time home buyers help individuals save hundreds if they buy a home at the upfront cost, but the individuals should use it for the said purpose only. There is a more significant way of saving money.
Home buyers should look for the best mortgage deals to save money on their purchase. The relaxed tax rules for first-time home buyers in Ontario make home purchases easy and affordable.