Disclaimer: I am not a financial or tax advisor. You are trading at your own risk and should consult a financial and tax advisor for any investment decisions and decisions that affect tax returns. Do your own due diligence when considering investing, and this information is for education/informational purposes only. The article “The $5,000 First Time Home Buyer Tax Credit” serves as educational content, not investing or tax advice.
Let’s cut to the point. Is there a credit for new homeowners?
Allow me to answer this yes. In fact, there is a new homeowner tax credit.
I had initially learned about this during my days as a student taking an income taxation course. I’m sure I’ve mentioned this about my past before.
And the entire concept around this credit is straightforward.
To qualify for a first-time homebuyer tax credit, the individual, their spouse, or common-law partner, has not owned and lived in another home during the same calendar year or in the preceding 4 years.
This limits the credit to those who purchased a home in the recent past.
It is probably apparent, but it must have been purchased within Canada.
One last important point Is that the home is acquired if the individual’s interest in the house is registered under an applicable land registration system.
How much tax credit for first-time homebuyers?
This is the question people likely want to know the most, and well, don’t be astounded by how much it really is.
The tax credit equals 15% of the first $5,000 paid for the home itself. This means the maximum credit one can receive $750.
I know, that’s not a crazy amount. It sure can help add up with the other credits to provide a refund, but it likely won’t suffice on its own to give the refund.
How does the first-time homebuyer tax credit work?
The tax credit works like any other tax credit. The credit is applied against the total taxes owing before any credits. I will provide a further demonstration below.
Here we assume Serge is a first-time homebuyer. He has not purchased any property within his life. Instead, just has been renting out various apartments.
In this scenario, we can break down his various sources of income, which stems from employment, and we will say someday trading (the capital gains).
As for the tax credits, he receives the basic personal tax credit as everyone typically does and the Canadian employment credit since he is employed by a Canadian company.
School finished his schooling this year, and he can receive a credit of up to a maximum of $5,000. Then we have the first-time homebuyer tax credit, as we can see in bold.
We understand now from the writing above that the maximum credit he can receive is $5,000 x 15%, which we clearly see.
As a result, it does not entirely erase the taxes he owes but decreases it by a sizeable amount.
how to apply for first time home buyer tax credit
As far as I’m aware, with most credits anyways, you don’t necessarily have to fill out any applications to receive the credit.
Usually, there are specific requirements that you must meet, and likely there will need to be some sort of proof of it. In some cases, it isn’t required.
I would have to ASSUME that you would need proof of ownership and maybe even loan payments, but likely the ownership will suffice.
Yet, even while I say this, it would be ideal for you to speak to a tax professional to understand what is necessary to receive the credit.
Is there any provincial credit?
I don’t think there is any provincial credit to keep it short. In fact, I really can’t find anything through my small amount of research. Therefore, I’ll assume it’s just a federal credit.
There may be some other incentives for people to reward, but I don’t think there’s anything that will reduce income taxes.
Having the first-time home buyer’s tax credit is undoubtedly a benefit of purchasing a home in itself. Serge’s example provided can certainly help decrease a significant portion of taxes compared to the other tax credits one may be eligible for.