There are quite a few housing benefits and tax credits available to first-time home buyers in Canada.
So, if you're thinking of buying a home — which can be a condo or a townhome too, not just a detached house — here are a few credits and benefits available to first-time home buyers in Canada.
First Home Savings Account
The First Home Savings Account (FHSA) is a registered account that allows you to save money for your first home with tax advantages.
Contributions made to the account are generally tax deductible and withdrawals you make to buy or even build a qualifying home are tax-free.
To open an FHSA, you must meet certain criteria to be a qualifying individual.
You're considered a qualifying individual if you meet all of the following requirements at the time the account is opened:
- are at least 18 years of age
- are not more than 71 years of age on December 31 of the year
- are a resident of Canada
- are a first-time home buyer
You can open an FHSA through an FHSA issuer like a bank, credit union, trust company, or insurance company.
When you open an account, there is an FHSA participation room for the year. That's the maximum amount that you can contribute to your FHSA or transfer from your registered retirement savings plan to your FHSA in the year without creating an excess FHSA amount.
Your FHSA participation room for the year that you open your first FHSA is $8,000 and the lifetime FHSA limit is $40,000.
As you probably expected, you can withdraw money out of your FHSA to buy your first house when you're ready to make a purchase.
Home Buyers' Plan
Canada's Home Buyers' Plan (HBP) allows you to withdraw up to $35,000 from your registered retirement savings plan (RRSP) to buy or build a home for yourself or a related person with a disability.
The withdrawal is tax-free if the money taken out of the savings plan is paid back within the required timeframe — within a 15-year period.
Also, you must meet the following conditions to be eligible for the HBP:
- you must be considered a first-time home buyer
- you must have a written agreement to buy or build a qualifying home, either for yourself or for a related person with a disability
- you must be a resident of Canada when you withdraw funds from your RRSP through the HBP and when the qualifying home is bought or built
- you must intend to occupy the qualifying home as your principal place of residence within one year of buying or building it
If you buy or build a qualifying home for a related person with a disability, or help a related person with a disability to buy or build a qualifying home, they must intend to occupy that home as their principal place of residence.
If you have previously used the HBP, you could be able to do it again if your repayable HBP balance on January 1 of the year of the new withdrawal is zero and you meet all the other HBP eligibility criteria.
As of April 1, 2023, you can withdraw amounts from your RRSP under the HBP and make a qualifying withdrawal from your First Home Savings Account for the purchase of the same home.
You have to meet all of the conditions for each benefit at the time of each withdrawal to do so.
First-Time Home Buyer Incentive
The First-Time Home Buyer Incentive is meant to help people across Canada purchase their first home.
This program offers 5% or 10% of a home's purchase price to put toward a down payment.
With that addition to a home's down payment, mortgage carrying costs are lowered which makes homeownership "more affordable," according to the federal government.
First-time home buyers who purchase a home in the Toronto, Vancouver, or Victoria Census Metropolitan Areas are now eligible for an increased Qualifying Annual Income of $150,000 — up from $120,000 — and an increased total borrowing amount.
These are a few criteria you need to meet to be eligible for the First-Time Home Buyer Incentive. That includes:
- your total annual qualifying income doesn't exceed $120,000 ($150,000 if the home you are purchasing is in Toronto, Vancouver or Victoria)
- your total borrowing — the amount of your mortgage plus the amount provided by the program — is no more than four times your qualifying income (4.5 times if the home you are purchasing is in Toronto, Vancouver or Victoria)
- you or your partner are a first-time home buyer
- you are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
- you meet the minimum down payment requirements with traditional funds (savings, withdrawal from a Registered Retirement Savings Plan, or a non-repayable financial gift from a relative/immediate family member)
Since the federal government provides part of your downpayment, the First-Time Home Buyer Incentive must be repaid in full after 25 years or when the home is sold.
First-Time Home Buyer's Tax Credit
With the Home Buyer's Tax Credit offered by the federal government, first-time home buyers who purchase a home can claim a non-refundable tax credit of up to $1,500.
GST/HST New Housing Rebate
The GST/HST rebate is available for new home purchases and is meant to reduce upfront costs so that homeownership is more affordable.
Canada's GST/HST new housing rebate allows individuals to recover some of the GST — goods and services tax — or the federal part of the HST — harmonized sales tax — paid for a new or significantly renovated house when certain criteria are met.
That home must be the individual's or their relation's primary place of residence.
Also, there are provincial new housing rebates that you could get for the provincial part of the HST regardless of whether the rebate for the federal part of the HST is available or not.
Currently, Ontario and Nova Scotia offer provincial new housing rebates.
This article's cover image was used for illustrative purposes only.