What is the First-Time Home Buyers’ Tax Credit?

Many Canadians are struggling to buy their first homes. The goal of the First-Time Home Buyers’ Tax Credit (HBTC) is to make it a little easier for taxpayers to make their home ownership dreams come true by allowing eligible first-time home purchasers to claim a $10,000 non-refundable income tax credit. First introduced in 2009, the HBTC initially allowed first-time or disabled home buyers to claim an amount of up to $5,000 on their returns. But in 2022, that amount was doubled to $10,000.

Since the HBTC is calculated by applying Canada’s lowest personal income tax rate of 15% to the $10,000, that works out as a non-refundable tax credit of up to $1,500. If you owe, this can help bring down your tax payable to zero.

Which homes qualify for the First-Time Home Buyers’ Program?

Qualifying homes must be located in Canada and registered in your name or your spouse or common-law partner’s name. This includes existing homes and homes under construction. According to the CRA, the following are considered qualifying homes:

• single-family houses
• semi-detached houses
• townhouses
• mobile homes
• condominium units
• apartments in duplexes, triplexes, fourplexes, or apartment buildings
• a share in a housing cooperative, if it gives you ownership of the underlying property.

To qualify as a first-time home buyer, you’ll have to meet the CRAs criteria for a first-time home buyer:

• You or your partner must have bought a home that qualifies for the HBTC.
• You haven’t lived in a home that was owned by yourself or your partner for the last 4 years.

To qualify as a disabled person, you’ll have to meet the following CRA criteria:

• You’re eligible for the Disability Tax Credit (DTC) the year you acquire your home. That means that you or 1 of your dependants have a serious and prolonged physical or mental impairment that has been certified by a medical professional. To qualify, you generally must experience difficulties in performing activities of daily living like walking, eating, hearing, or speaking.
• You buy a home for the benefit of a person who is eligible for the Disability Tax Credit. In this case, the disabled person must be a relative, as defined by the CRA—that is they must be connected by blood, marriage, common-law partnership, or adoption.
• The home is purchased to enable the disabled person to live in a home that is safe and comfortable.
• The disabled person must occupy the home as their principal place of residence no later than 1 year after the property is acquired.

The HBTC can be split between spouses or common-law partners or claimed by just 1 member of the couple. However, the combined total claimed cannot exceed $10,000.

Are you wondering how a couple should claim the home buyers’ amount? Given that it’s a non-refundable credit, make sure the spouse claiming it pays at least $1,500 in federal income tax. If they don’t, the credit won’t fully be paid out. If neither spouse pays $1,500 in federal income taxes, then they should split the credit in a way that maximizes the amount they’ll get back.

How do I claim the Home Buyers’ Tax Credit?

To claim the HBTC, enter the amount of $10,000 on line 31270 of your tax return. You can also divide the credit between your return and your spouse’s or common-law partner’s return, but the combined total claimed cannot be greater than $10,000.

The non-refundable tax credit rate is 15%. As 15% of $10,000 is $1,500, the actual reduction of your taxes will be $1,500. If your federal taxes are less than $1,500, your credit will be reduced accordingly, since it is a non-refundable credit.

If you’re claiming the HBTC for a home purchased for a disabled relative, enter the amount on the same line (31270) on your tax return. The CRA may contact you to ask you how you are related to the disabled person.