As a first time home buyer you are offered some first time home buyer incentives to help make buying your first home easier. The government allows first time home buyers a tax credit and the ability to utilize their RRSP’s as your down payment are just a few options available to help ease your first home purchase.
What is the home buyers’ tax credit (HBTC)
For 2009 and subsequent years, the HBTC is a new non-refundable tax credit, based on an amount of $5,000, for certain home buyers that acquire a qualifying home after January 27, 2009. The HBTC is calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5,000. For 2009, the credit will be $750.
You will qualify for the HBTC if:
- 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 house for a related person with a disability, you do not have to be a first-time home buyer. However, the home must be acquired to enable the person with the disability to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.
A qualifying home is a housing unit located in Canada acquired after January 27, 2009. This includes existing homes and those being constructed. Single-family homes, semi‑detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or 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.
RRSP Program Down payment Options
If you are a first time buyer, and have assets invested in an RRSP, you can withdraw up to $20,000 to apply towards the purchase of a home. You are considered a first time home buyer if you have not lived in a home owned by yourself or your spouse in the last five years.
In addition to being a first time home buyer, you must have entered into a written agreement to buy or build a home and intend to occupy that home as a principal residence. Any funds you wish to withdraw under the program must have been in your RRSP for at least 90 days. If you have less than $20,000 in an RRSP, its not too late to save money. You can make a contribution to your RRSP early in the year before the RRSP deadline. You can then receive a tax refund and 90 days later withdraw the RRSP contribution for use in buying a home.
Once you have applied the RRSP funds to the purchase of your home, you are required to pay back the RRSP over 15 years. Ordinarily, you will deposit 1/15 of the amount withdrawn back into your RRSP in each of the 15 years following your home purchase. If you fail to repay an amount required in any given year, then that amount will be included in your taxable income for the year.
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