If you’re looking for ways to save money as a first time home buyer, you’re going to want to read this. As part of Canada’s Economic Action Plan, Canadians looking to buy their first home may be eligible for first time home buyer tax credit and rebates that will help with the harrowing costs of buying a home.
DO FIRST TIME HOME BUYERS GET A TAX CREDIT IN TORONTO?
For buyers in Toronto, the government will credit you $750 when you buy your first home. You can apply for the first time home buyer tax credit if you meet the following criteria:
- You are buying a home within Canada
- You will occupy the home within one year of the purchase date
- You haven’t lived in a home owned by you or your spouse within the previous four years
If all of these apply to you then you are eligible for the first time home buyer tax credit.
How Do I Apply for the First Time Home Buyer Tax Credit?
To take advantage of the tax credit, you will need to claim it on your personal tax return for the year affiliated with your home purchase. In other words, if you purchase a home in 2020, you will apply for the first time home buyer tax credit on your 2020 tax return.
What Year Do I Apply for the First Time Buyer Tax Credit on a Pre-Construction Condo?
If you purchase a pre-construction condo there are a couple of different dates to be cognizant of. The occupancy date is when you are able to move in to the building while the registration date is when you officially take possession of the property.
If you purchase a condo where the occupancy date is one year, let’s say the end of 2020, but you take possession the following year, you will claim the tax credit during the year your condo is registered with the city and the title is transferred to you. In this case, it would be in 2021.
You can find a detailed account of the First-Time Home Buyer Tax Credit on the Government of Canada’s website.
FIRST TIME HOME BUYER LAND TRANSFER TAX REBATE
When you buy property in Ontario you will need to pay Land Transfer Tax at closing. For those of us buying property in Toronto, you will pay both municipal and provincial land transfer tax.
For eligible first-time home buyers, you can receive a maximum land transfer tax rebate of $4,475 on your municipal land transfer tax and up to $4,000 on your provincial land transfer tax. Use our land transfer tax Ontario calculator 2020 to see how much your rebate could be.
How to Apply for Land Transfer Tax Rebate Ontario
In order to apply for the Land Transfer Tax rebate you:
- Need to be 18 years of age
- Need to be a permanent resident of Canada
- Must occupy the home within nine months of purchase
- Cannot have previously owned a home locally or elsewhere in the world. If you are married and your spouse has previously owned a home, you are no longer eligible for this first-time home buyer land transfer tax rebate
If you are eligible, you must apply within 18 months of buying your property to obtain their first-time home buyer land transfer tax rebate. You can use this Form to apply for the Ontario Land Transfer Tax Refund.
THE HOME BUYERS PLAN
It’s worth mentioning here that there are also other first time home buyer incentives in place, such as the Home Buyers Plan. This incentive allows eligible first time buyers who have savings in their RRSPs to withdraw up to $35,000 towards a downpayment.
Essentially, it is a tax-free, interest-free loan from yourself. This amount doubles to $70,000 if you’re buying with your partner or spouse, so long as they also qualify as a first time home buyer.
THE OTHER TAX ADVANTAGE YOU SHOULD KNOW ABOUT
The beauty of buying a home or condo in Toronto is the year-over-year equity gains. When the time comes that you want to sell your principal residence, all of the profits you earn on that property are tax-free.
For example, if you buy a $500,000 condo and its valued at $700,000 when you go to sell, that $200,000 in equity is yours to keep completely tax-free! Owning your own home is the best way to get ahead financially — especially in a market like Toronto.
For those looking to buy a home in Toronto where the average cost of a home is $839,363, having access to the first time home buyer tax credit and other rebates can help you get there. If you’re interested in starting your home buying journey this year, book a call with us to get started.