Home buyers' tax credit

Today's focus is on the Home Buyers' Tax Credit (HBTC).

What is this credit?

The Federal Budget 2009 proposed a tax credit for First Time Home Buyers as an action to provide support for Home Ownership. This proposal was thought to assist first-time home buyers with the costs associated with the purchase of a home (i.e. legal fees, disbursements and land transfer taxes).

For 2009 and subsequent years, the budget proposes to introduce a new non-refundable income tax credit, based on the amount of $5000 for first time home buyers who plan to purchase after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax
relief starting in 2009.

How is the new HBTC calculated?

It is calculated based by multiplying the lower personal income tax rate for the year (15% in 2009) by $5000. So that means, for 2009, the credit will be $750.

Who qualifies for the HBTC?

The individual must meet the below criteria:

  • They acquire a qualifying home.
  • Neither the individual or spouse/common-law partner has owned and lived in another home in the year of purchase or any of the 4 preceding years.
  • A person with a disability or are buying a house for a related person with a disability, you DO NOT have to be a first time home buyer. The home must enable the person with a disability to live in a more accessible dwelling.

    Who is considered a person with disability?

    An individual who is eligible for the Disability Tax Credit (DTC).

    What is a qualifying home?

  • The home must be located in Canada.
  • This includes existing and new construction. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, apartments in duplexes, triplexes, fourplexes or apartment buildings all qualify.
  • A share in a co-operative housing corporation that entitles you to possess and gives you an equity interest in a housing unit located in Canada also qualifies. (BUT a share that only provides you with a right to tenancy in the housing does NOT qualify).
  • You or the related person with a disability must intend to occupy the home as a principal residence no later than ONE year of purchase.

    Can my spouse/common-law/friend claim the HBTC?

    Either person can claim the credit or you can share it. BUT the total of both claims cannot exceed $750.

    If you are purchasing a home with a friend, and you both meet the conditions for the HBTC, either one of you may claim the credit or share it. BUT the total cannot exceed $750.

    Does the home have to be registered under the applicable land registration system?

    Yes. The home must be registered in accordance with the applicable land registration system.

    How do I claim the HBTC?

    Beginning with the 2009 personal income tax return, a new line will be incorporated for you to claim the credit.

    Do I have to submit any supporting documents with my income tax?

    No. But make sure that the information is available just in case CRA requests for it.

    Is the HBTC connected to the Home Buyer’s Plan?

    No. Some of the conditions for the HBTC and Home Buyer’s Plan are similar but they are not connected. Eligibility for the HBTC will not change if you participate in the Home Buyer’s Plan.

    For more information on the First-Time Home Buyers’ Tax Credit, click on Department of Finance’s Budget 2009 (Page 128).

    Please refer to Canada Revenue Agency’s website for up-to-date details on the HBTC.

    This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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