How To Calculate First Time Home Buyer’s Tax Credit
Are you thinking about buying your first home? One of the top five reasons millennials don’t buy homes is affordability. Despite that, demand for houses has soared in the last two years, and prices have skyrocketed. Putting a down payment on a home can be costly, but one way you can save money is through the First Time Home Buyer’s Tax Credit. This Government of Canada program has been designed to help first-time buyers get started.
What Is It?
Launched in 2019, The First-Time Buyer’s Tax Credit is a non-refundable tax credit that is claimed on your tax return. It’s different from the incentive program by a similar name, which helps home buyer’s fund the purchase of their new home in exchange for equity on their house. The tax credit allows them to save money, it doesn’t have to be repaid, and there aren’t any strings attached. The idea behind the First Time Home Buyer’s Tax Credit is simply to encourage people to enter the real estate market.
Eligibility
This is a tax credit designed to benefit first-time homebuyers who purchase specific types of homes. It covers almost everything. If you’re buying a single-family house, a semi-detached house, a townhouse, a mobile home, a condominium unit, or an apartment in a duplex, triplex, fourplex, or apartment building, you’re in luck. There are also specific conditions that need to be met in order to qualify for the First-Time Home Buyer’s Tax Credit.
The home has to be registered under you and/or your spouse’s name
It has to be located in Canada
Neither you nor your spouse can have owned another house in the year of the purchase or the four years preceding it
Finally, you have to have moved into the home at least one year after buying it, and it must be your principal residence - meaning you have to live there most of the time
Calculating The Credit
Claiming the tax credit is pretty straightforward. You can claim up to 15% of $5,000, which you put towards the down payment on your first house. When you do the calculations - simply multiplying 5,000 by .15 (since 0.15 is 15%), it means your tax credit will come out to $750. This amount is claimable by you, your spouse or your common-law partner. You and your partner can claim parts of it. For example, you could each claim $2500 rather than one person claiming the full amount. Depending on your financial situation, there are advantages to how you want to claim the tax credit. You’ll only ever be able to claim the maximum amount. A maximum claim of $5,000 can be made on the house, so your partner and you can’t both claim the full amount.
Other Programs
Claiming the First-Time Home Buyer’s Tax Credit does not prevent you from applying to and benefiting from other government financial programs. For example, you will still be able to apply for the Home Buyer’s Tax Credit. To be eligible for other programs, you will have to meet other requirements and qualifying conditions. Research the various programs available to you and consider your options. When in doubt,
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