Both the federal and provincial governments have come with programs to help ease the financial burden for first time home buyers. Their main reasoning behind these programs is the hope that these programs will entice more young people to purchase their first home improving home sales and in turn improving the economy overall. The purpose of this blog is to look at both options breaking how they work and how they can benefit you.

First-Time Home Buyers’ Tax Credit (HBTC)

This program is the Federal option: It was purposed in the recent federal budget. For 2009 and subsequent years, the budget proposes to introduce a new non-refundable tax credit, based on an amount of $ 5,000, for certain  home buyers that acquire a qualifying home after January 27, 2009.

What Does that Mean for you ?

The key part of that statement is when they say “based on an amount of $ 5,000.” What this means is the credit is not $5,000 but that is the base number they use to calculate the refund. Your next question may be then how do they calculate the rebate? The HBTC is calulated by multiplying the lowest personal income tax rate for the current year. So if we look at this year for example (15% in 2009) by $5,000 equals a rebate of $750.

Who is Eligible for the HBTC?

An individual will qualify for the HBTC if:

• they acquire a qualifying home; and
• neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the year of purchase or any of the four preceding years.

There is an exception to these rules. If you are a person with a disability or are buying a house for a related person with a disability, you do not have to be a first-time home buyer. However, the home must be acquired to enable the person with a disability to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.

What is a Qualifying Home?

A qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units and apartments in duplexes, triplexes, fourplexes, or apartment buildings, all qualify. A share in a co-operative housing corporation that entitles you to possess and gives you an equity interest in a housing unit located in Canada also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

As well, you or the related person with a disability must intend to occupy the home as a principal place of residence no later than one year after buying it.

If I buy a house, can my spouse or common-law partner claim the HBTC

Either one of you can claim the credit or you can share the credit. However, the total of both your claims cannot exceed $750.

How will I Claim the HBTC?

Beginning with the 2009 personal income tax return, a new line will be incorporated to allow you to claim the credit.

Land Transfer Tax Refund for First-Time Home Buyers

This is the provincial option and this refund is applied to the Land Transfer Tax that everyone is required to pay on all transfers of land in Ontario. Land Tranfer tax is usually about 1.5% of the purchase price of your new home.

How Much is the Refund?

The maximum amount of the refund is $2,000. If the refund is claimed at the time of registration, it may offset the land transfer tax ordinarily payable. If not claimed at registration, the refund may be claimed directly from the Ministry of Revenue. No interest is paid on this refund.

Who Qualifies?

To claim a refund, you:

• must be at least 18 years of age;
• must occupy the home as your principal residence within 9 months of after the date of transfer; and
• cannot have owned a home, or an interest in a home, anywhere in the world.

In addition:

• your spouse can’t have owned a home, or an interest in a home, anywhere in the world while being your spouse; and
• in the case of a newly constructed home, you must be entitled to a Tarion New Home Warranty.

How Do you Apply?

Qualifying taxpayers may claim an immediate refund at the time of registration in one of two ways:

• If registering electronically, by completing the required statements under the explanation tab of the electronic affidavit.
• If registering on paper, by filling an Ontario Land Transfer Tax Refund Affidavit For First-Time Purchasers of Eligible Homes at the Land Registry Office.
• Applications for a refund must be made within 18 months after the date of the transfer.

If you have any other questions about these programs or are ready to make the leap and purchase your first home we are just an email away.