Rebates and Credits for First Time Home Buyers
Becoming a homeowner can be a daunting task. When considering the purchase price there are still taxes and costs to consider. But didn’t I hear that there were rebates and credits the government implemented this year to help new home buyers? What were they? How much are they? Will someone tell me about all of them so that I don’t miss out?The following are some of the programs, credits and rebates available to you when buying a home.
First Time Home Buyer’s Tax Credit (HBTC)
The Federal Government in an attempt to further stimulate the economy and urge consumers to get into the home buyers market announced on January 26th, 2009 that as of January 27th, 2009 qualifying individuals will be eligible to receive a tax credit to assist with costs such as legal fees and property tax transfers etc. The amount of this Tax Credit for 2009 is $750.
Unsure if you would qualify?
You must not have owned a house in the last five years and you have to be purchasing a “qualifying home.”
What’s a qualifying home?
Any “housing unit” within Canada qualifies as long as you OR a relative with a disability will be using the home as your principal residence. You cannot buy a rental property and qualify for the Tax Credit on that property.
How to I get this credit?
You must inform your accountant that you purchased a home in 2009 and you will be credited on your 2009 Income Tax Return.
First Time Home Buyer BC Property Purchase Tax Exemption
If you are a first time home buyer, you may be exempt from the BC Property Purchase tax. Your notary or lawyer should be able to confirm your eligibility for the exemption.
Some of the conditions for exempts are as follows:
1. You must not have owned a principal residence anywhere in the world
2. You must have resided in BC for at least 1 year
3. The purchase price must not be more than $450,000
4. The amount borrowed must be at least 70% of the fair market value of the property
The BC Property Purchase Tax is 1% on the first $200,000 and 2% on the amount over $200,000.
How do I apply for this Tax Exemption?
Your notary or lawyer will be able to inform you of the process and supply you with the required documentation.
GST New Housing Rebate
If you plan to purchase a mostly newly constructed or substantially renovated home to use as your primary residence you can obtain a rebate on part of the GST.
Which properties qualify?
The rebate is available for any of the following:
- building a home or contracting someone to build one
- buying a newly constructed or substantially renovated home from a builder
- buying a newly constructed house from a builder, where you lease the land from the builder under the same agreement to buy the house
- substantially renovating a home or building a major addition to one
- rebuilding a home destroyed by fire
- buying a share of the capital stock in a newly constructed cooperative housing project
- Applications must be received within 2 years of the possession date.
Home Buyers Plan
The Home Buyers Plan enables you to withdraw up to $25,000 tax free in RRSPs to use towards the down payment of a home.
- The balance must be paid back over the next 15 years. Generally, over the next 15 years you will have to pay back 1/15 of the total amount you withdrew until the full amount is paid back
- You are allowed to overpay in any year to reduce the number of years you have to pay back or eliminate the debt entirely
- You must start paying back in the first 60 days of the following year
- Any paybacks missed will be considered income and will be taxable at your current income tax rate
If you have $10,000 currently in RRSPs and you tax return states you have contribution room to purchase an additional $15,000 in RRSPs you can take out a loan and purchase $15,000 in RRSPs that can be withdrawn after 90 days. Why would you just not use the $15,000 loan as the down payment? Because you can write off the $15,000 as an RRSP contribution and receive a sizeable tax return (about $5,000 or more). These funds can be added to your down payment if time permits or can be used for any reason you wish. Caution – if you are employing this strategy and obtaining a loan for your RRSP contribution please discuss with me in advance as an additional payment in your debt service ratio may keep you from qualifying for your mortgage.
Article courtesy Marc Gobeil, TD Canada Trust www.tdcanadatrust.com/msf/marcgobeil