As the real estate market evolves, so do the programs designed to help first-time home buyers. Recently, the First-Time Home Buyer Incentive was discontinued in Canada. While this headline doesn’t feel like great news for first-timers trying to achieve their dream of homeownership, there are still several programs and tax benefits available that can ease the financial burden for Canadians buying their first home.

Land Transfer Tax Rebate

A Land Transfer Tax (LTT) is a significant cost that home buyers face when purchasing property. Fortunately, there are rebates available to first-time home buyers in certain provinces and municipalities. The LTT is a tax levied by provincial and municipal governments on the purchase price of the property, and it can add thousands of dollars to your closing costs. Here’s how the rebate works:

  • Ontario: First-time home buyers are eligible for a rebate of up to $4,000 on the provincial LTT. If you’re purchasing in Toronto, you may also qualify for a municipal rebate of up to $4,475.
  • British Columbia: Eligible first-time buyers can receive a full or partial exemption from the Property Transfer Tax on homes valued up to $500,000.
  • Prince Edward Island: First-time home buyers can receive a full rebate of the LTT for properties valued up to $200,000.

To qualify, you must be a Canadian citizen or permanent resident and you must live in the home as your principal residence within nine months of making the purchase. Additionally, you should not have owned a home, either individually or jointly with someone else, anywhere in the world.

RRSP Home Buyers' Plan (HBP)

The Home Buyers' Plan (HBP) allows first-time home buyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) tax free to purchase or build a qualifying home. Here are the key details of the HBP:

  • Withdrawal Limit: You can withdraw up to $35,000 from your RRSP without incurring any taxes. If you’re purchasing the home with a spouse or partner who is also a first-time buyer, you can each withdraw up to $35,000, for a total of $70,000.
  • Repayment Period: The amount withdrawn must be repaid to your RRSP over a period of 15 years, starting the second year after you make the withdrawal. If you fail to make the annual repayment, the amount will be included in your income for that year and subject to taxes.

To qualify for the HBP, you must be considered a first-time home buyer, which means you have not owned a home in the last four years. The home must also be your principal residence within one year of purchase.

First-Time Home Buyer Tax Credit (HBTC)

The First-Time Home Buyer Tax Credit is a non-refundable tax credit that helps first-time buyers with the costs associated with purchasing a home, such as legal fees, inspections, and other closing costs. The credit amount is calculated by multiplying $5,000 by the lowest personal income tax rate for the year. For 2023, the tax credit was $750.

GST/HST New Housing Rebate

If you’re buying a new or substantially renovated home, you may be eligible for a rebate on the federal portion of the Goods and Services Tax (GST) or Harmonized Sales Tax (HST). The rebate can be up to 36% of the GST or the federal portion of the HST paid on the home, with a maximum of $6,300. Provincial rebates may also be available, depending on where you live.