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Grants and Incentives for First-Time Home Buyers

Unlocking Financial Support: Understanding The Home Buyers’ Plan (HBP)

Navigating the Home Buyers’ Plan (HBP) Eligibility Criteria

The Home Buyers' Plan (HBP) is a helpful option for eligible individuals who want to purchase or construct a home. This plan is ideal for first-time buyers who can make a tax-free withdrawal of up to $35,000 ($70,000 for couples) from their registered retirement savings account (RRSP). After withdrawing, you have 15 years to repay the borrowed amount without any interest. The repayment period starts two years after the withdrawal has been made.

Who is eligible for the HBP?

The Home Buyers' Plan (HBP) is designed to assist first-time home buyers and people who have not occupied a home that they or their spouse owned in the past four years. Recently, the program has been expanded to include eligible individuals who are divorced or separated, even if they do not meet the first-time home buyer requirement. This means they can take advantage of the HBP a second time to purchase a new property or to buy out their former partner's share of the home as long as they have fully repaid their first HBP withdrawal.

Please note that you may also qualify for the Home Buyers' Plan (HBP) if you buy or construct a qualifying home for a person related to you with a disability. Additionally, if you assist a person related to you with a disability in purchasing or building a qualifying home, you may also be eligible for the HBP. However, it is crucial to ensure that the person with a disability who is related to you intends to occupy the qualifying home as their primary residence.

Tax-Free Savings: Exploring the First Home Savings Account (FHSA)

The FHSA is a new savings account that is specifically designed for those who are planning to buy their first home. You can make tax-deductible contributions of up to $8,000 per year, with a lifetime maximum of $40,000. Your contribution room begins to accumulate as soon as you open your first account. You can also carry forward any unused FHSA contribution room up to a maximum of $8,000 to use in the following year.

FHSA Eligibility: Who Can Benefit from Tax-Free Savings?

To open a tax-free First Home Savings Account (FHSA), you must meet the following eligibility criteria: 

  • You must be a resident of Canada. 

  • You must be between 18 and 71 years old*

  • You and your spouse must not own a home in Canada. This means you must be a first-time buyer. 

Transferring funds from an RRSP to a FHSA tax-free is now possible. However, the contribution limit is $8,000 annually, with a $40,000 lifetime limit.

Tax Credits: Leveraging Provincial and Federal Support

Tax credits can reduce the costs of buying your first home at both provincial and federal levels through two credits for eligible buyers.

Exploring Tax Credits: Home Buyers' Amount and New Housing Rebates

Home Buyers' Amount: If you're looking to buy a home, you may be able to use this credit to reduce your taxes. However, there are a few requirements you need to meet:

- You (or your spouse or common-law partner) must intend to live in it as your principal place of residence or have a related person with a disability occupy it as their principal place of residence.

- You (or your spouse or common-law partner) should not have lived in any other home you owned during the year of acquisition or in any of the four preceding years. This is applicable only if you're a first-time home buyer.

- The home you're buying must be a qualifying home.

The following are considered “qualifying homes”:

  • Single-family homes, semi-detached homes and townhouses

  • Prefabricated homes

  • Mobile homes

  • Condominium units

  • Apartments in multi-unit residential buildings

  • An ownership share in a housing cooperative that gives you an equity interest.

The maximum amount of credit that can be claimed is $750. If several individuals purchase a first home together, they can divide the credit among themselves.

New housing rebates: In certain provinces, such as Quebec, if you co-own a newly constructed (or significantly renovated) home, you could be eligible for a full or partial tax rebate (both GST and provincial sales tax) as long as the property is being used as the primary residence of one of the buyers, or one of their family members.

Local Opportunities: Grants and Incentives by Provinces and Cities

In Canada, certain provinces and territories offer programs that are specifically designed to help home buyers. For instance, you may qualify for a grant or a tax credit on the land transfer tax. This tax is commonly called the "welcome tax" in Quebec or the Land Transfer Tax refunds in Ontario. Below are some of the available programs that you can explore: