A tax credit all first-time homebuyers should know about

By
Real Estate Sales Representative with RE/MAX Hallmark Realty Group, Brokerage

Over my 30 years as a realtor, one of the things I’ve enjoyed the most is helping first-time buyers enter the Ottawa real estate market and purchase their first home, whether it’s a traditional detached home or a high-rise condominium apartment.

It’s rewarding to see the excitement on buyers’ faces when they hear that their offer on a home was successful and they will finally move in to a place they can call their own.

I also love helping people who have perhaps felt they can’t enter the market because they haven’t raised enough for a downpayment or some of the other expenses related to buying a first home.

As I explain to many interested buyers, there are government programs designed to help make purchasing your first home easier than you might think.

Many people, for instance, take advantage of the homebuyers’ plan, which allows them to withdraw from their RRSP savings (tax-free) and use it toward a downpayment. It’s an attractive option if you have exhausted other sources to help you put together a downpayment or if you are part-way there but need a few thousand dollars more for the downpayment amount you need.

The plan allows withdrawal of up to $25,000 per person or $50,000 per couple from your RRSP savings, without tax penalities. The only stipulation is that the amount has to be repaid over 15 years as you do your taxes each year. As you file your taxes, you will be required to pay a minimum of one fifteenth of the amount that you borrowed, until the amount you withdrew is re-paid.

This way, you will build your RRSP savings gradually back to the amount you originally had, and you are living in your own home in the meantime.

There’s another assistance program that is also worth knowing about, particularly as we’re getting close to the time many people will gather their paperwork and start filling out their income tax forms for 2015.

If you happen to have purchased your first home in the past year or are considering buying a first home in the coming year, you should be aware of the first-time homebuyers’ tax credit.

This is a non-refundable tax credit offered by the government of Canada for people who buy a qualifying home. It reduces the amount of taxes you owe and is designed to help buyers with some of the expenses that are involved in the purchase of that first home.

As the Canada Revenue Agency explains, the tax credit is based on $5,000. For the 2015 year, the credit works out to 15 per cent of the $5,000 amount, equalling $750.

There are some conditions...

Among those conditions, the home as to be in Canada, but it can be a townhome, a condo unit, an apartment, a detached or semi-detached home, a mobile home, or a share in a co-operative, if the share gives you the right to own the unit.

If you are buying a home with a partner, spouse or friend, either or both of you can make a claim on the tax form, as long as the combined total amount claimed is not over $5,000.

The program is for first-time buyers, defined as a buyer who has not owned a home in the year of purchase or in any of the last four preceding years.

The program is also open to buyers who are disabled or who are buying a home for a disabled resident, in which case you do not have to be a first-time buyer.

In those cases, the home must enable a person with a disability to live in a more accessible dwelling, or in an environment better suited to their personal needs and care.

To receive this tax credit for the 2015 tax year, you fill in the $5,000 amount, or amount you are claiming if sharing it with another person, on line 369 of Schedule 1 of the Federal Tax form.

For more detailed information on the credit, the conditions and how it works, visit the section of the Canada Revenue Agency website on the credit, where you can also see an informational video, at www.cra.gc.ca/hbtc

If you’d like more information on the plan that allows you to make a tax-free withdrawal of up to $25,000 per person or $50,000 per couple from your RRSP savings to use as a down payment, visit www.cra-arc.gc.ca/hbp

If you’ve been thinking of buying a first home, I’d love to meet with you and chat about your options and what’s available on the Ottawa market at the moment. If you don’t think your current budget might allow for a single detached home, for example, you might consider a condominium unit, where starter prices are lower.

If you’d like to get in touch, you can contact me through my website, at www.nancybenson.com, or by calling me at 613-747-4747.

 

Nancy Benson
Sales Representative
Direct: 613.747.4747
Office: 613.788.2556

Comments (2)

Jim West
Real Estate Technology Partners - Marysville, OH
Our Passion Is Helping 1st Time Home Sellers

Thank you for the lending tips

Feb 29, 2016 12:39 AM
Pat Champion
John Roberts Realty - Eustis, FL
Call the "CHAMPION" for all your real estate needs

Great post this is valuable information for the First Time Home Buyer I wish our market area had the tax credit again it would really help the FTHB. Thanks for sharing I hope you have a great day.

Feb 29, 2016 12:54 AM