First-Time Homebuyers Tax Credits: Save More on Your First Home

First-Time Homebuyers Tax Credits: Buying your first home in Canada is both exciting and overwhelming. Between saving for a down payment, finding the right property, and navigating closing costs, new buyers can feel financially stretched. Fortunately, the Canadian government offers several first-time homebuyer tax credits and incentives to make homeownership more affordable. Understanding these programs can help you save thousands of dollars and manage your finances wisely.

What Is the First-Time Home Buyers’ Tax Credit (HBTC)?

The Home Buyers’ Tax Credit (HBTC) is one of Canada’s most recognized supports for first-time buyers. It allows eligible individuals to claim a non-refundable tax credit when they file their income tax return.

For the 2023 tax year and onwards, the HBTC amount increased to $10,000 (previously $5,000). This means first-time homebuyers can receive a tax relief of up to $1,500, depending on their income tax situation. The credit applies to homes purchased for personal use—such as a house, condo, townhouse, or even a share in a cooperative housing corporation.

Who qualifies?
To claim the Home Buyers’ Tax Credit, you must meet the following conditions:

• You (and your spouse/common-law partner, if applicable) are buying your first home.

• You did not live in another owned home during the past four years.

• You intend to occupy the new home as your principal residence within one year of purchase.

If two people jointly buy the home, the credit can be claimed jointly but cannot exceed the $10,000 total.

The Home Buyers’ Plan (HBP): Borrow From Your RRSP

Another valuable tool for new homebuyers is the Home Buyers’ Plan (HBP). This program lets you withdraw up to $60,000 from your Registered Retirement Savings Plan (RRSP) to use toward your home purchase—without paying tax on the withdrawal.

The HBP acts as an interest-free loan from your own retirement savings. However, the withdrawn amount must be repaid within 15 years through annual RRSP contributions. Each year, the Canada Revenue Agency (CRA) will remind you how much you need to repay to stay compliant.

Key details:

This program is especially beneficial for buyers who have built up RRSP savings and want to use part of it for their down payment without triggering immediate taxes.

The First Home Savings Account (FHSA): Save Smarter and Faster

Introduced in 2023, the First Home Savings Account (FHSA) combines benefits from both RRSPs and TFSAs (Tax-Free Savings Accounts). It allows Canadians to save for their first home tax-free, providing both tax-deductible contributions and tax-free withdrawals for qualifying home purchases.

How it works:

• You can contribute up to $8,000 annually, with a lifetime maximum of $40,000.

• Contributions reduce your taxable income, just like an RRSP contribution.

• Withdrawals made for purchasing your first home—including investment gains—are completely tax-free.

You can even combine funds from an FHSA and an HBP withdrawal to maximize your buying power. This dual incentive gives first-time buyers significant financial flexibility.

GST/HST New Housing Rebate

When you buy a newly built home, you may be eligible for the GST/HST New Housing Rebate, which refunds part of the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) paid on the purchase. This rebate helps buyers offset costs from new constructions or major home renovations.

For example:

• You can claim 36% of the GST paid on a new home priced at $350,000 or less.

• For homes between $350,000 and $450,000, the rebate gradually phases out.

• Some provinces also offer provincial rebates for the HST portion (like Ontario, British Columbia, and Nova Scotia).

If you’re buying a brand-new home from a builder, the rebate may already be deducted from your purchase price—so it’s wise to confirm with your builder or real estate lawyer.

Provincial Programs and Additional Incentives

Beyond federal programs, many provinces and municipalities offer additional first-time homebuyer incentives. These can include land transfer tax rebates, down payment assistance, or affordable loan programs designed for qualifying residents.

Examples include:

• Ontario: Up to $4,000 land transfer tax refund for first-time homebuyers.

• British Columbia: Full or partial land transfer tax exemption for eligible buyers.

• Nova Scotia and Prince Edward Island: Targeted grant programs for new homeowners in local communities.

Always check your province’s housing authority or real estate association for the latest updates before finalizing your home purchase.

How to Claim Your First-Time Homebuyers Tax Credits

When tax season arrives, claiming your Home Buyers’ Tax Credit and related benefits is straightforward.

Follow these steps:

1. File your income tax return for the year you purchased your first home.

2. Enter the $10,000 credit amount on line 31270 of your federal tax form.

3. If sharing the credit with a partner, ensure the combined total does not exceed $10,000.

4. Keep supporting documents (such as your purchase agreement and mortgage details) in case the CRA requests verification.

For the HBP, you’ll need to complete Form T1036 when withdrawing funds and track your repayment each year. For FHSA savings, your financial institution typically provides contribution and withdrawal records for tax reporting purposes.

Why Taking Advantage of These Credits Matters

Every dollar counts when entering Canada’s housing market. Between inflation, higher mortgage rates, and closing costs, first-time buyers benefit greatly from federal and provincial assistance.

Using programs like the HBTC, HBP, and FHSA can help you:

• Reduce your tax burden.

• Access more funds for your down payment.

• Build financial stability sooner.

• Turn your homeownership dream into a long-term investment.

Understanding and combining these tools smartly can make the difference between delaying your purchase and confidently stepping into your first home.

Frequently Asked Questions (FAQs)

1. How much is the First-Time Home Buyers’ Tax Credit in Canada?
Eligible buyers can claim up to $10,000, which offers a maximum tax savings of $1,500.

2. Can I use both the Home Buyers’ Plan and the FHSA?
Yes. You can combine funds from your RRSP under the HBP and your FHSA to enhance your down payment.

3. What happens if I don’t repay the HBP amount?
Any unpaid annual amount is added to your taxable income for that year, reducing your future contribution room.

4. Are new construction homes eligible for tax credits?
Yes. You can claim the GST/HST New Housing Rebate for new homes if you meet eligibility requirements.

5. Can my spouse also claim the First-Time Home Buyers’ Tax Credit?
Yes. You and your spouse or partner can share the $10,000 credit, but the combined total cannot exceed that amount.