Buying your first home can be an adventure full of wonderful moments, and thanks to Canada’s First-Time Home Buyer (FTHB) Plans, you can reap some tremendous benefits. What are these plans and how do you qualify for them? Here are the basics that every first-time homeowner should be aware of:
What are Canada’s FTHB Plans?
The FTHB Plans were first introduced in 1992 by the federal government as a means of helping more Canadians become homeowners. They are separated into three separate programs that provide various tax breaks and incentives to eligible individuals, and amounts can vary.
The programs are as follows:
- The Land Transfer Tax Rebate is a pro-rated rebate of up to $2,000 ($4,000 in Toronto) that varies depending on the home price.
- The FTHB RRSP Plan enables for up to $25,000 withdrawals from each person’s RRSP as a down payment.
- The FTHB Tax Credit is a credit of $750 towards income taxes for all parties combined.
Who Qualifies as a First-Time Home Buyer?
First of all, you need to purchase a qualifying home either that you intend to use as your primary residence within one year of the purchase date or for a disabled relative. Bear in mind that those who have owned an interest in a home elsewhere in the world previously don’t qualify for the Land Transfer Rebate, and to be eligible for tax and RRSP-related benefits you can’t have lived in a home owned by yourself or a spouse during the last four years.
Important Rules to Follow
For RRSP benefits, RRSPs must be in your account for 91 days prior to withdrawal for a deposit and paid back to your RRSP within 15 years. Additionally, the property must be bought and/or built before October 1st of the year after you withdraw the RRSP funds for the deposit. Also, all benefits must be claimed in the same tax year in order to be eligible. Owners of rental properties should note that they could still be considered for the FTHB Tax and RRSP benefits as well, and it is recommended that they apply.
Applying for and Receiving Benefits
To apply for the Land Transfer Tax Rebate, fill out a paper-based or digital form to the Land Registry Office — the lawyer responsible for closing your purchase and/or mortgage normally performs this. FTHB RRSP plan applicants need to complete and hand in form T1036 to the institution from where they withdraw their RRSPs. For the FTHB Tax Credit, simply claim the credit on line 369 of your regular income tax return. It’s important to note that all benefits will arrive at the same time as the rest of any income tax liabilities.
With this knowledge at your disposal, it is easier than ever to start saving as a first-time homeowner in Canada! With increased savings comes reduced stress and maximum enjoyment of your new property. For assistance with the FTHB Plans in any capacity, contact our team of trusted mortgage advisors today!