First Time Home Buyers

5 Feb    Purposes

Benefits for the First-Time Home Buyer


There are 3 main benefits for the first-time home buyer: The Home Buyers’ Plan, The First-time Home Buyers Tax Credit, and the First-Time Home Buyers’ program for property transfer tax exemption. Please read below for further detail.


If you are a first-time home buyer, the Home Buyers’ Plan (HBP) allows you to withdraw money from your Registered Retirement Savings Plan (RRSP) tax-free to make your down payment. The HBP is administered by the Canada Revenue Agency (CRA).

How much can you withdraw?
• You can withdraw up to $25,000 from your RRSP.
• If you buy the home together with your spouse, partner, or someone else, each of you can withdraw up to $25,000, for a total of up to $50,000.
• The withdrawal from your RRSP does not need to be included in your income on your annual income tax return, and no tax is taken off the money you withdraw.
• Note: Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP. If they do not, you might not be able to deduct all or part of the contributions you made during this period.

What is the payback period?
• You don’t have to start paying back the money to your RRSP until two years after the purchase of the home.
• You must pay back all withdrawals from your RRSP within 15 years by making RRSP deposits each year, starting the second year following your withdrawal. CRA will determine what your minimum yearly repayment will be and will notify you once you need to start repaying the amount.
If you do not repay the amount due in a given year, it is included in your taxable income for that year and you’ll have to pay income tax on this amount.

Conditions for participating in the HBP:
• You have to enter into a written agreement to buy or build a qualifying home
• You have to intend to occupy the qualifying home as your principal place of residence
• You have to be considered a first-time home buyer (or have not owned a home in the last 4 years)
• Your repayable HBP balance on January 1 of the year of the withdrawal has to be zero
• Neither you nor your spouse or common-law partner can own the qualifying home more than 30 days before the withdrawal
• You have to be a resident of Canada
• You have to complete Form T1036 for each eligible withdrawal
• You have to receive all withdrawals in the same calendar year
• You cannot withdraw more than $25,000
Note: If the total of your RRSP withdrawals under the HBP is more than $25,000, the excess will be subject to tax, and you will have to include the excess amount in your income for the year you received it. In addition, your RRSP issuer will have to withhold tax on the excess amount at the time of the withdrawal.
• You have to buy or build the qualifying home before October 1 of the year after the year of the withdrawal
• You have to file an income tax return

First-Time Home Buyers’ Tax Credit

Through Canada’s Economic Action Plan, the federal government introduced the First-Time Home Buyers’ Tax Credit (HBTC) to help with the purchase of a first home. The $5,000 non-refundable HBTC amount applies to qualifying homes acquired after January 27, 2009, and provides up to $750 in federal tax relief. An individual is considered a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the year of the home purchase or in any of the four preceding calendar years. Claimants should ensure that documentation supporting the purchase transaction is available if requested by the Canada Revenue Agency. First-time home buyers purchasing a home may claim the HBTC on their income tax returns. For more information, please visit the Department of Finance Canada website or the Canada Revenue Agency website.

First Time Home Buyers’ Program under the Property Transfer Tax Act

The First Time Home Buyers’ Program provides a property transfer tax exemption to eligible first time home buyers.
Property Transfer Tax Rates:
The amount of tax due depends on the fair market value of the property that is transferred:
– If the fair market value is $200,000 or less, the tax is 1% of the fair market value.
– If the fair market value is greater than $200,000, the tax is 1% of the fair market value up to $200,000, plus 2% on the portion of the fair market value that is greater than $200,000.

You qualify as a first time home buyer if:
– you are a Canadian citizen, or a permanent resident as determined by Immigration Canada,
– you have lived in British Columbia for 12 consecutive months immediately before the date you register the property, or you have filed 2 income tax returns as a British Columbia resident during the 6 years before the date you register the property,
– you have never owned an interest in a principal residence anywhere in the world at anytime, and
– you have never received a first time home buyers’ exemption or refund.
Please note: You cannot re-qualify as a first time home buyer. This rule may be different for other federal programs for first time home buyers (e.g. the Canada Revenue Agency Home Buyers’ Plan).

Property Requirements
The property you purchase qualifies if:
– the fair market value of the property is not more than the qualifying value of $425,000 (only if purchasing an existing home),
– the land is 0.5 hectares (1.24 acres) or smaller, and
– the property will only be used as your principal residence.

If the property does not meet all of these requirements, you may still qualify for a partial exemption.

You apply for the exemption when you register the property at the land title office.
Generally, a lawyer or notary public registers the property and applies for the exemption on your behalf.