What Is The Credit?
The federal government offers a $5,000 credit to certain home buyers. The amount of the credit can be a little bit misleading; this credit will not allow you to save $5,000 in taxes. This credit is always applied against the lowest tax bracket, which is 15%. The maximum tax savings are actually $750, which is found by multiplying the $5,000 tax credit with the 15% tax bracket to find your actual savings ($5000 * 15% = $750).
Who can Claim this Tax Credit?
The federal government offers this credit for two types of purchases. The first eligible purchase is a purchase by a first time homebuyer. The second eligible purchase is the purchase, for or by a disabled person, of a home that accommodates their disability.
A first time home buyer is someone who does not own a house and has not owned a house in the preceding four calendar years. So even if you have owned a house in the past, if it was long enough ago, you may still qualify for this credit. This credit can be claimed by the first time home buyer or by their spouse. If a group of first time home buyers buy a house together they can use this credit, however, they will have to split the maximum $750 tax savings between them.
For the purpose of this credit a disabled person is someone who is eligible to claim a disability amount on their taxes in the year that the house is acquired. The credit can be claimed by whoever buys this property, be it the disabled person themselves or someone else buying a home for them. Under these circumstances the buyer does not have to be a first time home buyer to get the credit. However, the house purchased has to be lived in by the disabled person and the house must be specially equipped to address the disabled person’s needs.
When Can I Claim This Credit?
You must claim this credit in the year in which you take ownership of the property, not necessarily the year you enter into the agreement to buy the property. If you have purchased a condo you should claim this credit when you take ownership, which may not be the same year as you get to move in.
Which Properties Are Eligible For The Credit?
In order to qualify for the credit the property must be in Canada and be one of the following types of property:
- single-family houses;
- semi-detached houses;
- mobile homes;
- condominium units; or
- apartments in duplexes, triplexes, fourplexes, or apartment buildings.
Most Canadian properties that someone would buy for them or their family to live in will qualify.
Don’t forget to take advantage of this great opportunity to save some tax money when you buy a home. If you have any questions about how to take advantage of this credit or any questions at all about buying or selling a home please don’t hesitate to contact the experts at Rabideau Law.