There are programs available to help first-time buyers get into their home and tax credits/rebates that can assist with closing costs and other home-related expenses.

Tax-Free Home Savings Account – COMING SOON!

Starting in 2023, financial institutions can begin to offer an account that will allow qualified first-time homebuyers under the age of 40 to contribute $8,000 per year for 5 years for a total of $40,000 or $80,000 for a couple. Like an RRSP, contributions will be tax-deductible and, like a TFSA, all withdrawals which include investment income will be non-taxable. There is no requirement to repay it as there is with the RRSP Home Buyers’ Plan (HBP).

You can transfer $8,000 annually, up to $40,000 over five years, from your RRSP to the Home Savings Account without having to pay taxes on the withdrawal, although you’ll lose that same amount in RRSP contribution room. This looks to be a terrific way for young Canadians to get a start on their home savings account and get access to their RRSP money tax free for their home purchase. Keep in mind that this new plan and the HBP cannot both be used for the same purchase.

If you don’t end up purchasing a home, your account balance can be transferred to an RRSP, giving you additional RRSP contribution room.

RRSP Home Buyer’s Plan (HBP)

First-time buyers can withdraw up to $35,000 per person tax free from their RRSPs ($70,000 for a couple) to buy or build a qualifying home, which can be a big boost to your overall down payment amount and may help you reach the 20 percent down needed to avoid paying mortgage default insurance premiums.

Even if you have your downpayment, here is a strategy that may make sense for you. If you have enough RRSP contribution room, contribute your $35,000 at least 90 days before closing. That contribution will trigger a nice tax refund that can really bolster your downpayment or help with other costs associated with your home purchase. The funds contributed must be kept in the account for 90 days before you can make the withdrawal.

To avoid paying taxes altogether, you need to repay the withdrawn funds on a 15-year repayment plan that begins the second calendar year after withdrawal. If you don’t repay, then 1/15th of the amount will be included in your taxable income each year.

Land Transfer Tax Rebate

Land transfer tax, which is a percentage of your new home’s purchase price, is typically a big surprise to Brampton, Toronto and GTA first-time homebuyers because the amount can be substantial. In Ontario, first-time homebuyers can receive a full or partial rebate of up to $4,000. If you are thinking of buying a home in the city of Toronto, you can receive an additional rebate of up to $4,475.

First-Time Home Buyer Tax Credit

First-time buyers can claim a portion of their home purchase on their personal tax return for the year of purchase. Budget 2022 doubled this tax credit from $5,000 to $10,000, giving first-time buyers up to $1,500 in federal tax relief for homes purchased on or after January 1, 2022, which can help with all kinds of first home expenses.

HST New Housing Rebate

If you are purchasing a new construction home or performing significant renovations to an existing one, whether a first-time buyer or not, you can recover some of the HST that you paid if all eligibility conditions are met. Ontario will refund 75% of their portion of the HST on the first $400,000 of your home’s value, which totals $24,000. An additional maximum of $6,000 is available from the federal portion.

You need to apply within two years of your closing date and the home must be used as your or an immediate family member’s primary place of residence. Only immediate family members can be on title, or this rebate will be denied. If this may apply to you, check out the CRA’s Guide titled GST/HST New Housing Rebate (RC4028).

Green House Program

All homeowners purchasing a qualifying energy-efficient home with an insured mortgage are eligible for up to a 25 percent mortgage insurance premium refund, which can be a substantial savings. If you buy a home and renovate it to make it more energy-efficient you can also apply for this refund.

First-Time Buyer Incentive Program

This shared equity program with the federal government helps first-time buyers get into the market by providing 5 percent of the cost of an existing home, or 10 percent of the purchase price of a new home. The Incentive must be paid in full after 25 years, when the home is sold or other conditions are met. You can voluntarily prepay the full amount at anytime.

Effective June 1, 2022, a limit to the government’s shared equity portion was put in place. Their share in the appreciation or depreciation of the home at the time of repayment is now up to a maximum gain or loss amount of 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment. Say the original home value was $800,000 and a 5% incentive as taken, or $40,000. The house was sold or appraised at $950,000 five years later. The full $40,000 must be repaid along with their share of the appreciation ($150,000 x 5% = $7,500). This is less than the maximum possible shared equity gain, which in this example is $16,000 ($40,000 x 5% x 5 years).

As per Budget 2022, this program will be extended to March 31, 2025, and they are looking at ways to make it make more acceptable to first-time homebuyers because the take up has been very low.

The maximum qualifying household income is $150,000 and the maximum purchase price is $722,000 for 5% down and $794,000 for 14.99% down.