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Published August 2, 2021

How First-Time Buyers Can Claim a $5,000 Tax Credit

Canada’s Home Buyers’ tax credit is one of the easiest and simplest benefits for new property owners to receive.

The Home Buyers’ tax credit, also known as the Home Buyers’ amount, is a federal government program to make homeownership more attainable for some Canadians. The program allows eligible first-time home buyers to claim a $5,000 non-refundable income tax credit.

What is the Home Buyers’ tax credit?

Eligible first-time home buyers can claim a $5,000 non-refundable income tax credit on a qualifying home. The amount essentially adds up to a $750 tax rebate.

» MORE: How does a mortgage work in Canada?

Home Buyers’ tax credit eligibility

To be eligible to claim the Home Buyers’ tax credit you (or your spouse or common-law partner) must:

  • Buy a qualifying home registered in your (or your spouse’s or common-law partner’s) name. It can be an existing property or under construction and includes single-family structures, townhouses, condo units and more.
  • Be a first-time home owner, meaning that you did not reside in a property that you or your spouse or common-law partner owned in the previous four years.
  • The qualifying home must become your principal place of residence within one year after it’s bought or constructed.

Note that there are exceptions for eligible persons with a disability in that they can apply for the tax credit without needing to be a first-time home buyer.

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How does the Home Buyers’ tax credit work?

Claiming the Home Buyers’ tax credit is incredibly straightforward, as there’s no need to apply or be approved.

When it comes time to do your taxes, you put the Home Buyer’s amount of $5,000 on Line 31270 of your income tax return. The government allows you to split the amount with your spouse or common-law partner, but your combined total claims must not exceed $5,000. The credit results in a $750 rebate on the taxes you owe for the year. (The amount is calculated at the lowest personal tax rate, which is presently 15%.)

If you owe less than $750 in taxes for the year, you can only reduce your taxes to $0 — you won’t get an additional refund — as this is a non-refundable tax credit. Be sure to keep all your home buying documentation in case the CRA requires proof of your eligibility for the credit.

Other help available

In addition to the Home Buyers’ tax credit, the federal government has several other programs to help make it more affordable for Canadians to purchase their first property. Since they are entirely separate programs, you can claim both the tax credit and reap the benefits of these programs.

The Home Buyers’ Plan allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) tax-free. You must repay the amount within 15 years.

The First-Time Home Buyer Incentive is a program wherein new home buyers can apply for a form of shared equity mortgage with the Government of Canada. The government lends eligible home buyers either 5% or 10% of a property’s purchase price to put toward the down payment. The loan is tax free and must be repaid within 25 years or when the house is sold.

The GST/HST New Housing Rebate allows someone buying an eligible newly constructed home to recover some of the GST or the federal part of the HST paid.

Provincial programs. Some provinces may offer home buying programs specifically designed to make property more affordable for first-time buyers, so check with your municipal government to see what incentives might be available in your province. For example, both British Columbia and Ontario have a land transfer tax refund program for first-time home buyers.

About the Author

Sandra MacGregor

Sandra MacGregor has been writing about personal finance, investing and credit cards for over a decade. Her work has appeared in a variety of publications like the New York Times, the UK Telegraph, the Washington Post, Forbes.com and the Toronto Star. You can follow her on Twitter at @MacgregorWrites.

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