For first time home buyers, any form of financial or planning incentive is a great way to make home buying easier and memorable. Investing in one’s first home is a big financial commitment. It takes some first time home buyers a number of years to make owning their own home a reality. The Canadian government, on all levels, has created a number of programs that first time home buyers can take advantage of. These provide accessible resources to help make buying a first property easier and more manageable.
First Time Home Buyers (FTHB) Tax Credit
The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for First Time Home Buyers who must pay these costs, as well as save money for a down payment. To assist First Time Home Buyers with the costs associated with the purchase of a home, the Government of Canada introduced a FTHB Tax Credit in 2009 — a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief starting in 2009.
First Time Home Buyers RRSP Plan
To provide First Time Home Buyers with greater access to their RRSP savings to purchase or build a home, the Government of Canada has increased the Home Buyers Plan withdrawal limit to $25,000 from $20,000 per person for withdrawals made after January 27, 2009.
The withdrawn amount must be repaid within 15 years, subject to a minimum annual repayment that is 1/15 of the amount withdrawn. If the full $25,000 is withdrawn, the minimum annual repayment is $1,667. If less than the minimum is repaid in any particular year, the balance is added to the taxpayer’s income. To qualify for the Home Buyers Plan, an individual must not have owned a home during the last 4 full calendar years.
To obtain more information on the First Time Home Buyers Tax Credit and the First Time Home Buyers RRSP Plan, call 1-800-O-Canada or visit the Canada Revenue Agency website at www.cra.gc.ca.