I am planning to purchase my first home. Are there any tax incentives for first time home buyers?

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As a first time home buyer you may be eligible to receive a partial refund of the Ontario Land Transfer Tax which is charged on real estate purchases. The First Time Home Buyers’ Tax Credit and the Home Buyers’ Plan are federal programs that provide assistance.

Land Transfer Tax (LTT)

The Land Transfer Tax is paid to 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 LTT depends on the purchase price and the current tax rate rises progressively from 0.5% on the first $55,000 of the purchase price to 2% of the amount of purchase price which
exceeds $400,000.

First time home buyers get a LTT 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.

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)

Home buyers 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 must be repaid to the RRSP within 15 years. To qualify, the Purchaser must not have owned a home in the preceding four years.

EDITOR’S NOTE: This publication is the third 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 legalmatters@compellingcounsel.com