Buying a home is likely the biggest purchase you will make in your lifetime, so you should be aware of the programs and rebates that allow you to recover some of your costs. Costs can add up quickly and if you do not take advantage of these offers, you could be passing on thousands of dollars in savings.

1.     First-time home buyers’ tax credit

The first-time home buyers’ tax credit was created to help first-time buyers recover closing costs on their first property, so more funds can be put towards their down payment.

Currently, the credit amounts to a $750 rebate for first-time buyers. However, if you are purchasing a property with someone else, the combined claim cannot exceed $750.  The non-refundable credit has to be claimed within a year of purchasing the property, and should be included with your personal tax return under line 369.[1]

2.     Land transfer tax rebates

Provincial land transfer taxes can amount to thousands of dollars, yet in the provinces of Ontario, British Columbia and Prince Edward Island, much of this, if not all, can be recovered through rebates if you are a first-time buyer. Toronto, being the only city that charges a land transfer tax at the municipal level, also has a similar rebate.

Land transfer tax fees are mandatory with any title transfer and can add significantly to the purchase of a property. A first-time home buyer can reclaim the full value of the tax up to a limit of $2,000 in Ontario, the full value for properties up to $425,000 in BC, and up to $3,725 in Toronto. In PEI, first-time buyers are exempt from paying the tax altogether if the property is less than $200,000.[2]

You can calculate provincial land transfer tax charges, including rebates, using RateHub’s land transfer tax calculator.

*The City of Toronto land transfer tax is calculated independently from the Province of Ontario so you are made accountable to both if you live in Toronto.

3.     RRSP Home Buyers’ Plan

Perhaps the most attractive first-time home buyer allowance is the RRSP Home Buyers’ Plan (HBP). With a Registered Retirement Savings Plan (RRSP), any contributions you make are tax-deductible.  But, if you withdraw funds before retirement, you must repay your tax credits.

The nifty thing about the RRSP Home Buyers’ Plan is that it allows first-time home buyers to withdraw up to $25,000 tax-free to fund a down payment on a property.[3] So, you can knowingly make contributions to your RRSP for the purpose of a future home purchase, reap tax savings, and re-apply those savings to a down payment.

The HBP withdrawal, however, is considered a loan and you will have to repay it within 15 years. However there is no interest calculated on it, and you are essentially paying yourself back.

To participate in the Home Buyers’ Plan (HBP), print off a copy of Form T1036 online from the Canada Revenue Agency. Fill out Section 1 and get the financial institution that holds your RRSP to fill out Section 2. Your institution will then send you a T4RSP form, which will verify the amount you withdrew from your RRSP through the HBP.  Reference the form in your income tax return for the year you made the withdrawal.

It may involve a little bit of form-filling and organization on your part, but there is no excuse to not reclaim free money. These credits were created to ease the financial burden of first-time homebuyers and it would be foolish not to take advantage of them!

Don’t forget to maximise your savings by shopping around for the best mortgage rate either over at RateHub.ca