BY: VLADO HAJTOL
This week’s Reader asks: I noticed a lot of houses are going to up for sale at this time of year and my spouse and I are interested in possibly purchasing a home. Are there any tax incentives available to first time home buyers?
If you are a first time home buyer you may be eligible to receive assistance from federal programs such as the First Time Home Buyers’ Tax Credit and the Home Buyers’ Plan. You may also be eligible for a partial refund of the Ontario Land Transfer Tax.
First Time Home Buyers’ Tax Credit (HBTC)
The First Time Home Buyers’ Tax Credit is available for the taxation year in which a first home is purchased. The value of this tax credit is $5,000. It can lower a person’s income tax by up to $750.
Home Buyer’s Plan (HBP)
A home buyer can withdraw up to $25,000 from an RRSP if the funds are used towards the purchase of their home. Although there are no immediate tax consequences at the time of withdrawal, the full amount withdrawn must be repaid to the RRSP within 15 years. In order to qualify, the purchaser must not have owned a home in the preceding four years.
Land Transfer Tax (LTT)
The Land Transfer Tax is paid to the Ontario government whenever there is a registered change of ownership of real property. While there are certain exceptions, the Land Transfer Tax is generally payable whenever someone purchases a residential home. The amount of the Land Transfer Tax depends on the purchase price.
First time home buyers get a Land Transfer Tax refund up to a maximum of $2,000. To qualify for this refund, you must not have owned a home anywhere in the world in the past and you must use your new home as your primary residence within nine months of the purchase. If you are buying a home together with someone that is not a first time home buyer, you can still receive half of the refund.
EDITOR’S NOTE: This publication is the 27th installment of our firm’s Legal Matters series, which answers a reader’s question every week. If you have a general legal question that you would like to have addressed please send it via email to firstname.lastname@example.org.