You’ve done it. After years of hard work, saving and making smart investments, you can finally afford to purchase your first home. Now what?

For many, the home buying process can be very overwhelming. From dealing with bankers, real estate agents, and lawyers, seeking out the necessary accounting advice is not usually top of mind. Fortunately, below you can find a list of opportunities and tax incentives available to a first-time home buyer. This information includes what you can and can’t deduct, available tax credits, and other tips to make you a tax-savvy homeowner.

First-time Home Buyers’ Tax Credit (The Home Buyers Amount)

As the name implies, this tax credit is only available to a first-time home buyer. To be considered a first-time home buyer, you cannot have owned a home or lived in a home owned by your spouse within the last four years. You must also have the intention of living in the home within one year of purchase, so this tax credit is not available to people purchasing a rental property. As of 2022, this tax credit can be worth up to $1,500, and the application process is relatively straightforward. If you’ve purchased a home in the last year and believe you qualify for this tax credit, be sure to let your accountant know to claim it on your return. More information can be found here on the CRA website.

Land Transfer Rebate

Again, this is only available to first-time home buyers. When you buy land in Ontario, you pay a land transfer tax. The Land Transfer Rebate provides a full rebate on the land transfer tax paid on a home purchase up to a maximum purchase price of $368,000. For homes purchased above that threshold, the rebate is capped at $4,000. This provides an added incentive to make your first home purchase as it lowers the initial costs of home ownership. The Ontario government provides information on the program here.

RRSP Home Buyers’ Plan

The Canadian Government has also implemented the Home Buyers’ Plan, allowing you to withdraw up to $35,000 (up from $25,000 in 2019) tax-free from an RRSP ($70,000 for a couple) to assist in financing a down payment on a house. This amount must be repaid within 15 years of the date withdrawn, at a minimum rate of one-fifteenth of the total amount withdrawn each year. However, it can be repaid faster depending on cash flow and personal preference. One important caveat is that the funds must be deposited into your RRSP for a minimum of 90 days prior to the date of withdrawal. You will also be required to present written documentation indicating that you have agreed to buy a home. More information from CRA on the RRSP Home Buyer’s Plan can be found here.

Tax-Free First Home Savings Account

In 2022, the government proposed to introduce the Tax-Free First Home Savings Account (FHSA). This new plan would give prospective first-time home buyers the ability to save $40,000 on a tax-free basis. To learn more information about this plan, click here.

Moving Expenses

If you move more than 40 kilometers closer to your place of employment (either by changing jobs or moving closer to an existing job), you may be eligible to claim your associated moving costs on your tax return. This will help to reduce your taxable income, and thus your taxes payable. Qualifying moving expenses include legal costs, real estate fees, transportation and storage costs, temporary living expenses and travel expenses, among others. If you’ve moved closer to your principal place of employment and believe you may qualify to claim these expenses, it’s important to speak to your accountant to ensure you’re eligible and also able to maximize your deduction.

Final Thoughts

In 2019 the Canadian Government introduced a new incentive for first time home buyers. The First Time Home Buyer Incentive (FTHBI) acts as a second mortgage in partnership with the government. The incentive is 5% of the purchase price of the home (10% for new builds), with 5% of the market value of the property being repaid at the time of sale (with a maximum appreciation or depreciation amount per year).

Eligibility requirements are similar to the Home Buyers Amount, and the government helpfully provides the income and debt qualifications and several example calculations here.

If you’ve recently made your first housing purchase, be sure to let your accountant know so they can take advantage of these deductions on your behalf.

Contact your local RLB Advisor today at 1-866-822-9992, or email info@rlb.ca.

This blog has been reviewed and updated for accuracy (January 2023).