There are all sorts of benefits to being a first time homebuyer in Canada. Two you may be entitled to are the RRSP Home Buyers’ Plan and the First-time Homebuyers’ Tax Credit Program. Let’s see how each works and whether or not they apply to you.
RRSP Home Buyers’ Plan
As a first-time home buyer, you are allowed to withdraw from your RRSPs in order to help with your home’s down payment. It’s the one and only time you can take money out of the account without being taxed on the amount you withdraw. Under the plan, you are allowed to withdraw up to $25,000 – as is your partner, married or common-law – as long as it is applied to the same property. In order to be entitled to this plan, you (or your partner) cannot have owned a home in the 4 years prior to the purchase of your new home. You must also occupy the home you purchase within one year of the date of purchase.
The money you ‘borrow’ from your RRSPs must be paid back in a minimum of 15 years from the date that they are withdrawn. Although there is no interest applied to the amount you have borrowed, there is a repayment schedule that must be adhered to. You must pay at least 1/15th of the total amount ‘borrowed’ each year by the end of year, or 60 days after the end of the year, beginning in the second year. The amount you repay is not deductible from your income for that year.
Learn more about the RRSP homebuyers’ plan here: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html
First-time Homebuyers’ Tax Credit
The government offers a federal tax credit to qualifying first-time homebuyers, which can be claimed against your personal income tax – but only in the year that you purchase your new home. To qualify, you and your partner cannot have owned a home in the previous 4 years, including the year of purchase. Also, you must personally occupy the house within one year of purchase. The tax credit – a total amounting to $750 – can be claimed by one party, or shared by two.
Learn more about the first-time homebuyer’s tax credit here: http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html