The First-Time Home Buyers' Tax Credit (HBTC) was enhanced in 2022. This federal credit allows new buyers to deduct up to $10,000 from their income tax return, which can result in a refund of up to $1,500. Quebec also offers a tax relief of up to $1,500. In the case of a joint purchase, this amount will be divided between the owners.

To qualify for the HBTC, you must be a new buyer or not have lived in a home that you (or your spouse) owned in the past four years. These criteria do not apply if you are eligible for the Disability Tax Credit (DTC) or if the property is used to house a person with a disability who is entitled to the DTC.

Applying for this credit is simple: when filing your income tax return with the Canada Revenue Agency (CRA), enter the credit amount on line 31270. In Quebec, complete form TP-752.HA and attach it to your tax return.

To calculate the tax credit amount, multiply it by the lower personal income tax rate of 15%: $10,000 x 0.15 = $1,500. Combining both levels of government, you get $3,000.

The Home Buyers' Plan (HBP) now allows you to borrow up to $60,000 from your RRSPs without paying tax. You must start repaying the amount in the fifth year following the withdrawal, and you have 15 years to repay the full amount, i.e., 1/15 per year. If the minimum amount is not repaid for a given year, you will be taxed on it in the following fiscal year.

Couples can each participate in the HBP and withdraw up to $60,000. The amount is not transferable from one spouse to the other. To be eligible for the HBP, you must be a first-time buyer or not have lived in a property that you (or your spouse) owned in the past four years. A written agreement for the construction or purchase of a home must also have been concluded, and the property must be used as a principal residence in the first year after purchase or construction.

The Tax-Free First Home Savings Account (FHSA) is a new federal program effective April 1, 2023. It allows eligible Canadians to deposit up to $8,000 per year, up to a lifetime limit of $40,000. Unused annual contributions can be carried forward up to $8,000 to the following year.

The FHSA combines the benefits of the Registered Retirement Savings Plan (RRSP), the HBP, and the Tax-Free Savings Account (TFSA). It will cease to be an FHSA on the 15th anniversary of the opening date or when the saver reaches the age of 71. The accumulated amounts can then be transferred to an RRSP or a Registered Retirement Income Fund (RRIF) and will be taxed at the marginal tax rate at the time of withdrawal. If the amounts are withdrawn for other purposes, they will be taxed accordingly.

Canadians aged 18 to 71 who have not lived in a home they owned in the year the account was opened or in the previous four years can open an FHSA.

To learn more about these programs and get personalized advice on buying your first home, feel free to contact us. We are here to guide you every step of the way in your real estate project.