Canada $10,000 Tax Rebate For First-Time Home Buyers: How to Claim in 2024?

With tax season upon us, if you have become a homeowner for the first time in 2023, you’re probably eligible for the Canada First-Time Home Buyers’ Tax Credit. In this post, we will explain how to claim the Canada $10,000 Tax Rebate for first-time home buyers in 2024.

The First-Time Home Buyer Incentive aims to alleviate the monthly mortgage expenses for qualifying first-time buyers without exacerbating their financial strain. Engaging in this initiative can make homeownership more accessible, as the increased down payment provided by the incentive results in reduced monthly mortgage obligations.

According to the Canadian Association of Accredited Mortgage Professionals, about 620,000 Canadian families move into a new home each year, and 45% of those are first-time buyers between the ages of 25 and 34. 

What is the Canada First-Time Home Buyers’ Incentive?

Canada’s First-Time Home Buyer Incentive (FTHBI) is a collaborative mortgage program with the Government of Canada aimed at enhancing the affordability of homeownership for first-time buyers. This initiative provides either 5 or 10% of the home’s purchase price to assist with the down payment.

Alternatively recognized as the Home Buyers’ Amount (HBA), this federal non-refundable tax credit helps offset various expenses associated with purchasing your first home, such as legal fees. By allowing you to retain more funds in your bank account come tax time, it functions as a non-refundable tax credit, reducing your owed income tax without providing a refund.

Eligibility for this tax deduction necessitates being a first-time homebuyer in Canada. The credit serves as a financial boon for taxpayers, calculated based on the home’s purchase price. The program was launched in 2019 to help Canadians with the costs of first-time homeownership.

Canada First-Time Home Buyers’ Incentive (FTHBI) Summary

Here is an overview of the Canada First-Time Home Buyers’ Incentive (FTHBI), also known as the Home Buyers’ Amount (HBA) or first-time home buyers’ tax rebate, which provides benefits worth up to $10,000:

Canada First-Time Home Buyers’ Incentive Amount Calculation

Initially introduced in 2009, the HBTC enables first-time homebuyers, as well as buyers with disabilities, to receive a $10,000 non-refundable tax credit.

The HBTC is calculated based on the lowest income tax rate of 15%, resulting in a one-time tax reduction of $1,500 for the $10,000 claim. Consequently, this reduces the amount owed on your tax return by $1,500. If your tax liability is less than $1,500, the HBTC lowers your taxes owed to $0. 

However, if you do not have any income tax payable, there is no advantage to claiming the HBTC. Additionally, the credit can only be claimed in the tax year you purchased your home, meaning that a house bought in 2023 can only be claimed on your 2023 tax return.

The FTHBI was an interest-free loan that helped first-time home buyers increase their down payment by 5–10% depending on the property’s market value. However, the program was unpopular and fell short of its goals, providing $285 million in funding for 23,000 home buyers instead of its target of $1.25 billion and 100,000 people.

Qualifying Homes for Canada $10,000 FTHBI in 2024

A qualifying property refers to one situated within Canada and registered under your name, your spouse’s, or common-law partner’s name. This encompasses both existing residences and those currently under construction. As per the guidelines set by the CRA, the following types of properties are deemed eligible:

• Detached single-family dwellings
• Semi-detached residences
• Townhouses
• Mobile homes
• Condominium units
• Apartments within duplexes, triplexes, quadruplexes, or apartment complexes
• Ownership share in a housing cooperative, provided it confers ownership rights to the underlying property

Canada $10,000 FTHBI Eligibility Criteria

The eligibility requirements for the First-Time Home Buyer Incentive (FTHBI) in Canada are meticulously crafted to cater to prospective homebuyers embarking on their first homeownership journey and facing specific financial circumstances. Here’s an overview of the eligibility criteria:

First-Time Homebuyer Status:

The initiative prioritizes individuals or families purchasing their first home, ensuring that the program aids those who have not previously owned a property, thus fostering homeownership among newcomers to the real estate market. Additionally, you must be living at the property.

Income Limit:

Participants must adhere to an income limit of $120,000 or below. This threshold is established to extend the incentive to individuals or families with moderate incomes, potentially encountering difficulties in affording homeownership without financial support.

Mortgage and Incentive Amount Limit:

The total sum of the participant’s insured mortgage and the incentive amount is capped at four times their qualified annual income. This provision safeguards against excessive debt accumulation, encouraging responsible borrowing practices and mitigating the risk of financial strain. 

For instance, if a participant earns a qualified annual income of $100,000, the combined value of their insured mortgage and the incentive cannot surpass $400,000.

These eligibility criteria are strategically formulated to target the FTHBI’s financial assistance towards first-time homebuyers in dire need while promoting prudent borrowing habits and the long-term sustainability of homeownership. 

Through these measures, the program strives to furnish valuable support to individuals and families, all while effectively managing the financial implications associated with property ownership.

How to Apply for Canada $10,000 First-Time Home Buyers’ Tax Rebate?

To avail of the FTHBTC, simply input $10,000 on line 31270 of your 2023 tax return. If you have a spouse or common-law partner, you can divide the amount, but the total cannot exceed $10,000. For instance, each of you can claim $5,000, resulting in a credit of $750 to reduce your income tax payable.

There’s no requirement to provide evidence of your home purchase when submitting your taxes, whether electronically or via mail. However, it’s advisable to retain any supporting documents for up to six years in case the Canada Revenue Agency requests to review your records.

UPDATE: The Canada Mortgage and Housing Corporation (CMHC) discontinued the First-Time Home Buyer Incentive (FTHBI) in March 2024. The final deadline for applications was March 21, 2024, and no new approvals were granted after March 31, 2024.

Documents Required to Apply for the Canada $10,000 FTHBTC

While specific supporting documents are typically not required to be filed with the tax return, it’s crucial to retain the following paperwork in case the Canada Revenue Agency (CRA) requests them:

• Agreement of Acquisition and Sale: This document verifies the actual purchase of the property.
• Documentation validating the home’s eligibility criteria: These records serve as evidence that the property meets the requirements for eligibility.
• Proof of disability documentation: If applicable, documentation supporting a disability claim, such as a Disability Tax Credit certificate, may be considered as proof of disability.

More Programs For First-Time Home Buyers in Canada

Every opportunity counts when embarking on the journey to homeownership. Be sure to explore these additional programs to determine if they could complement the FTHBTC:

Home Buyers’ Program (HBP): Also referred to as the First-Time Home Buyers’ Plan, this initiative enables you to withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) for purchasing or constructing a home. You’ll have a 15-year timeframe to repay the withdrawn amounts.

Tax-Free First Home Savings Account (FHSA): This plan permits you to save up to $8,000 annually, or a total of $40,000, in a tax-exempt account. Contributions to the account are tax-free, as are withdrawals meeting the qualifying criteria.

Home Accessibility Tax Credit (HATC): Designed for individuals with disabilities or those aged 65 and above who receive the Disability Tax Credit (DTC), this program allows you to claim up to $20,000 in annual expenses for home improvements aimed at enhancing accessibility. The tax credit amounts to 15% of the expenses, capped at $3,000.

The GST/HST New Housing Rebate: This rebate enables eligible buyers of newly constructed homes to recover a portion of the GST or the federal component of the HST they’re required to pay.

Additionally, there are state-backed and funded programs for home buyers in several Canadian provinces such as Ontario, British Columbia, and PEI.

Final Words

The Canada $10,000 First-Time Home Buyers’ Tax Rebate presents a significant opportunity for eligible individuals to ease the financial burden associated with purchasing their first home. By providing a non-refundable tax credit of up to $1,500, this initiative aims to make homeownership more accessible and affordable for those taking their first major steps.

Aspiring homeowners should carefully consider their eligibility and take advantage of this program when filing their tax returns. While the rebate may not cover all upfront costs, it can certainly alleviate some of the financial pressures associated with buying a home, particularly for those with moderate incomes.

Furthermore, individuals must ensure they keep accurate records and meet all requirements to claim the rebate successfully. By understanding the program’s details and implications, prospective homebuyers can make informed decisions and maximize the benefits offered by the First-Time Home Buyers’ Tax Rebate.

Disclaimer: It’s important to consult with a qualified tax professional or financial advisor to fully understand the eligibility criteria and implications of claiming the Canada $10,000 First-Time Home Buyers’ Tax Rebate. This information is provided for general guidance purposes only and should not be considered as professional tax advice.