There are two Government of Canada programs that are currently in place to help First Time Home Buyers. I have summarized them below:
1) Home Buyers’ Tax Credit – A person who has not owned a home in the preceding 4 years can claim $5,000 on line 369 of the personal income tax form. This is a non-refundable tax credit – meaning that you can use this to reduce your tax, but will not receive a cash refund from it. This tax credit can be split between two or more eligible parties. The amount of the rebate depends on the tax bracket, but is generally $750. The property must be located within Canada and includes any sort of dwelling, but does not apply to lot purchases. You must move into the property within 1 year of purchase to be eligible.
2) Home Buyers Plan – A great way to save for your down payment is to do it through the Home Buyers Plan (“HBP”). The HBP allows you to withdraw your Registered Retirement Savings Plan (“RRSP”) balance, without penalty, for your down payment. The HBP requires that you “pay it back” over 15 years. This means you must make a contribution to your RRSP of 1/15th of the amount withdrawn yearly. If you do not make these contributions, then 1/15th is added to your income for that given year.
REQUEST TO REDUCE TAX DEDUCTIONS AT SOURCE (T1213) – This form can be used in conjunction with RRSP contributions to reduce the amount your employer is required to withhold from your earnings. By utilizing this form, you can build your downpayment through your RRSP while not missing a lot of money from your monthly paycheque.
