Benefits of the New Home Buyer Tax Credit

home buyer tax credit being determined on calculator

One of the benefits of building or buying a new home is that there are several tax programs that allow you to receive funds back on things like GST and tax credits. Unfortunately, the differences between these programs can sometimes be confusing. To help you navigate the complicated tax system, we’ve broken down the three tax programs that can help you earn money back on your new home:

The Home Buyers’ Amount

The Home Buyers’ Amounts (HBA) is a tax credit that allows eligible applicants to claim a tax credit of up to $5,000, lowering the amount of federal tax payable. To be eligible for the tax credit, you have to satisfy the following conditions:

  • Either you, your spouse, or your common-law partner must have purchased a qualifying house (a single-family home, townhouse, condo, mobile home, apartment, or home under construction) in the previous year.
  • If you don’t have a disability, you must be a first-time home purchaser. According to the Canada Revenue Agency, this means you haven’t lived in another house owned by you or your partner in the time you bought your new home or in the four years prior to that time.
  • If you have a disability or purchased the home for someone who does, you don’t need to be a first-time home buyer, but you do need to use the space as a primary residence no more than one year after obtaining it in order to qualify for the HBA.

The Home Buyers’ Plan

The Home Buyers’ Plan (HBP) is different from the Home Buyers’ Amount in that it isn’t a tax credit — instead, its purpose is to give new home buyers the option of taking funds from their Registered Retirement Savings Plans (RRSPs) to construct or purchase a new home in Canada either for themselves or for relatives who have disabilities. There is a tax break associated with the HBP in that the amounts withdrawn from the RRSPs are not taxed as income. Because of this, the HBP can be a great savings facilitator if you have RRSPs.

If you qualify for the HBP, you can withdraw up to $25,000 per calendar year from your RRSP and are required to repay all withdrawn RRSP funds in the next 15 years from the time of each withdrawal. You can do this by repaying amounts to your RRSPs every year until your HBP balance zeroes out. Just like with the HBA, you have to be a first-time home purchaser to qualify for the HBP unless you have a disability or are purchasing the home for a relative with a disability. You also have to use the home as your principal, primary residence no more than a year after having built or bought it.

The GST New Housing Rebate

The GST new housing rebate can allow you to get back some of the goods and services tax you paid on a new or heavily renovated house used as your primary place of residence. You may be eligible to claim the rebate if one the following conditions applies to you:

  • You bought or built a new house or significantly renovated an existing home for use as your or your relation’s primary place of residence. This condition could also include a house located on leased land if the lease is for 20 years or more or offers you the choice to potentially buy the land.
  • You bought shares in a cooperative housing complex with the intention to use one of the units inside as your or your relation’s primary place of residence.
  • You bought or completed heavy renovations on your own home or hired someone else to build or significantly renovate the home you or your relation is using as a primary place of residence and the fair market value of that home after construction is substantially completed is less than $450,000.

Mobile, modular, and floating homes also qualify for the rebate. For more details, check out Guide RC4028, GST/HST New Housing Rebate.

Filing for Your GST New Housing Rebate

You can usually submit your rebate application without any additional supporting documentation, but you do need to send invoices along with you worksheet if your vendor didn’t charge GST — though you don’t have to send originals; photocopies will get the job done. In some cases, you may also need to submit proof of occupancy if asked.

Make sure to keep copies of your completed forms on hand after you’ve submitted them along with all your original invoices, receipts, and any other documentation used to fill out your forms for six years in case you’re asked for them — and keep in mind that only original invoices in the claimant’s name is acceptable. Without original invoices, photocopies, credit or debit card, or account statements will not be accepted for examination if you’re asked to submit documentation.

Build Your New Home in Cornerstone

If you’re looking for the perfect place to build your new home and qualify for these beneficial programs in the process, Calgary’s northeastern community of Cornerstone may be the right fit for you. We’ve hand-selected the industry’s top home builders so there is a home for everyone’s lifestyle and budget. Learn more about Cornerstone and the options available to you by stopping by one of our beautiful show homes or contacting us by phone or email today.

DISCLAIMER: Always consult with a tax professional to assess the right programs for your financial and home buying situation.

Sources:
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/gst-hst-home-construction/gst-hst-new-housing-rebate.html
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-369-home-buyers-amount.html
https://turbotax.intuit.ca/tips/the-difference-between-the-home-buyers-amount-and-the-home-buyers-plan-2100