To qualify as a First-Time Home Buyer, you must have:
- Never purchased a home before, or
- Have gone through a breakdown of marriage or common-law partnership, or
- Have not occupied a home that either you or your current spouse or common-law partner owned in the last four years.
The main first-time buyer incentives are:
Home Buyers Plan (HBP) - Using RRSPs for Downpayment:
- As a first-time buyer, you can withdrawal up to $35k from your RRSP account to use as downpayment.
- You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP account.
- If your partner/co-applicant is also a first-time buyer, they can also contribute another $35k, for a total of $70k.
- Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.
- The amount withdrawn must be paid back into an RRSP account over a 15-year period (minimum of 1/15th per year). This can be managed through your CRA online portal.
First Home Savings Account (FHSA):
Effective April 1, 2023, as a first-time buyer, you can save for your first home in a tax-free savings account.
- Contribute up to $8K/annually to a lifetime maximum of $40K
- The money is 'tax-free in, and tax-free out", as it's tax deductible like an RRSP upon contribution, and tax-free upon withdrawal like a TFSA (tax free savings account)
- If you don't contribute the full annual amount, it will carry forward to the next year (i.e. only contributing $2k this year, means you can contribute $14k next year), once you open the account.
- It can be paired with the existing Home Buyers Plan to maximize your Down Payment potential
- Like RRSP contributions, you don’t have to claim the FHSA deduction in the year you make the contribution. The contribution can be carried forward indefinitely and deducted in a later tax year, which may make sense if you expect to be in a higher tax bracket in the future.
Land Transfer Tax Rebate:
A land transfer tax rebate will depend on the province of the property. For example, in Nova Scotia, there is no rebate. In Ontario, you'll receive a full rebate up to a $368,000 purchase price, after that it's a partial rebate. In Alberta, there is no land transfer tax at all!