First-Time Home Buyers Now Qualify for Additional Tax Credits

First-Time Home Buyers Now Qualify for Additional Tax Credits

Beginning in 2009, the Federal government announced adjustments to the rules for Government-backed insured mortgages. These changes will significantly reduce the total interest payments Canadians make on their mortgages, promote saving through responsible home ownership, and limit repackaging of consumer debt into mortgages guaranteed by taxpayers. A new First-Time Home Buyers’ Tax Credit, in the year the home is purchased, was introduced for first time home buyers that buy a qualifying home.

What is the First-Time Home Buyers’ Tax Credit (HBTC)?

The HBTC is a non-refundable tax credit for certain homebuyers who acquire a qualifying home after January 27, 2009.

How is the First-Time Home Buyers’ Tax Credit Calculated?

The HBTC is calculated by multiplying the lowest personal income tax rate for the year (15% in 2011) by $5,000. For 2011, the credit was $750.00. This may change in the future based on the income tax rate. If the total of your non-refundable tax credits are more than your federal income tax, you will not receive a refund for the HBTC.

How to Qualify for the First-Time Home Buyers’ Tax Credit

• You or your spouse or common-law partner acquired a qualifying home; and
• You did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.
• If you are a person with a disability or are buying a home for a related person with a disability, you do not have to be a first-time home buyer to get the HBTC. However, the home must be acquired to enable the person with a disability to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.

For the purposes of the HBTC, a person with a disability is an individual who is eligible to claim a disability amount for the year in which the home is acquired, or would be eligible to claim a disability amount if we ignore that costs for attendant care or care in a nursing home were claimed as medical expenses on lines 330 or 331.

What is a Qualifying Home?

A qualifying home is a home located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, as well as apartments in duplexes, triplexes, fourplexes, and apartment buildings all qualify. A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in, a housing unit located in Canada also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

Also, you must intend to occupy the home or you must intend that the related person with a disability occupy the home as a principal place of residence no later than one year after it is acquired.

Important Things to Remember

The home must be registered in your or your spouse’s or common-law partner’s name in accordance with the applicable land registration system. You do not have to submit documents supporting your purchase transaction with your income tax and benefit return. However, you have to make sure that this information is available if the Canada Revenue Agency asks for it.