Navigating the different programs and tax credits available to first time buyers can be overwhelming. However, it is crucial that first time home buyers be aware of the ways in which they can offset some of the costs of home ownership.
First-Time Home Buyers’ Tax Credit (HBTC)
The HBTC is a non-refundable tax credit for qualifying homebuyers purchasing qualifying homes. Basically, the HBTC can reduce the amount of taxes you owe.
The $5,000 non-refundable tax credit provides up to $750 of federal tax relief. It is based on a down payment of $5,000 and is calculated by multiplying the lowest personal income tax rate (15%) x $5,000 = $750.
To qualify, you, and anyone you are purchasing the home with, must be considered first time buyers, which means neither you nor your spouse or common-law partner have owned another home the year you purchased your home, or in the four preceding calendar years. Furthermore, the home must be used as your principle residence, and must be occupied no later than one year after it has been acquired.
When two or more eligible individuals jointly purchase the home, the credit may be shared but cannot exceed $750.
If only one individual is eligible to claim the tax credit, the percentage of that individual’s ownership of the home can be used. So, if you own 50% of the home, you can claim 50% of the tax credit (ie. 50% of $750= $375).
First Time Home Buyers’ Program
Not to be confused with the HBTC, the First Time Home Buyers’ Program is another way first time home buyers can offset some of their costs.
The First Time Home Buyers’ Program is a BC program that reduces or eliminates the amount of property transfer tax you pay when you first purchase your home.
To qualify for a full exemption, you must:
- Be a Canadian citizen or permanent resident;
- Have lived I BC for 12 consecutive months immediately before registering the property, or have filed at least 2 income tax returns as a BC resident in the last 6 years;
- Have never owned an interest in a principle residence anywhere in the world; and
- Have never received a first time home buyers’ exemption or refund.
And your property must:
- Be located in BC;
- Be used as your principle residence;
- Have a fair market value o $475,000 or less; and
- Be 0.5 hectares or smaller.
You may be eligible for a partial exemption if the property:
- Has a fair market value less than $500,000;
- Is larger than 0.5 hectares;
- Has another building on the property other than the principal residence.
And to keep the exemption, you must:
- Be moved into your home within 92 days of registering the property, and
- Continue to occupy the property as your principal residence for the remainder of the first year.*
*At the end of the first year that you own the property, you will receive a letter to confirm that you meet the occupancy and property value requirements.
For more information, visit the program’s website http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand/first-time-home-buyers.
Or call me today to discuss the options available to you!