Tax time has a lot of implications for both homeowners and home buyers, but usually when the talk of homes and income taxes combine, that talk revolves around RRSPs and the First Time Home Buyer’s Plan. But there’s something else that can help both owners and buyers when it comes to taxes, and that’s making sure that you take advantage of the First-Time Home Buyer’s Tax Credit.
The HBTC (Home Buyer’s Tax Credit) has been available since 2009 and provides first-time, and other, qualifying home buyers with a $5,000 credit that is to help off-set the costs of buying a home. Those costs include things such as legal fees, disbursements, and land transfer taxes – all costs which first-time home buyers might find especially challenging to deal with after saving for a down payment (something else that is now harder than ever in Canada.)
In order for a homeowner to be eligible, they nor their spouse can have owned and lived in a home for the previous four tax years, as well as the present tax year. Another category in this program, qualifying homeowners, must purchase a home within the country that they plan to occupy within the coming year.
If one spouse claims a portion of this tax credit, but they have another portion of that credit still remaining, their spouse can claim the unused portion, but the total amount still cannot exceed the allotted $5,000.
Just like any other tax credit you’re applying for, it’s extremely important that you collect all documentation to support any claims, including any documentation used for the purchase of the home as well as any receipts for fees or costs associated with the purchase of that home (not including the mortgage or down payment.) This paperwork may be required by the Canada Revenue Agency at any time and should also be kept for at least seven years with your other tax records.
The First-Time Home Buyer’s Plan offered through the RRSP can be a huge benefit to home buyers who want to use funds for their down payment, but don’t want to be heavily taxed on that income. But while this is usually the biggest talk surrounding home ownership and taxes, make sure that you’re not just getting the tax protection you need – but that you’re also getting the benefits, too. That’s just what the HBTC will do for qualified home buyers.