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New Canadian Tax Laws - Benefits to Home Buyers


The 2009 Budget has some very important implications for those people looking to purchase a home.  The two key items are as follows; 

  1. An increase in the dollar amount buyers can withdraw from their RRSPs

  2. New First Time Home Buyers’ Tax Credit

Home Buyers' Plan (HBP) 

The Home Buyers’ Plan (HBP) allows first-time home buyers an increase from $20,000 to $25,000 as the withdraw limits from a Registered Retirement Savings Plan (RRSP) to purchase or build a home.  Taxes will not need to be paid on the withdrawn amount.  


A person is considered a first-time home buyer if neither the individual nor their spouse or common-law partner, owned and lived in another home in the calendar year or any of the four (4) previous calendar years in which the HBP withdrawal is made. 


The funds must be used to purchase a home before October of the year following the year of withdrawal.  The funds must be paid back to the RRSP in a period not to exceed fifteen (15) years.  The payments will be made in installments and if the payments are missed, the money associated with the payments missed will be added to the income of the person for the year.  In order to withdraw the funds the RRSP must be in place for a period greater than 90 days. 


The increase is effective January 27, 2009 and will apply for 2009 and beyond. 



FTHB' Tax Credit

The 2009 Budget also introduces a new non-refundable tax credit of 15% of closing costs up to a limit of $5,000 in closing costs for a maximum benefit of $750 for a FTHB.   Closing costs may include provincial property transfer tax, legal fees, inspection fees and appraisal costs to name a few.


A FTHB is defined in a similar fashion to the HBP above.  A home may qualify for this credit if a person or their spouse or common law partner live in the home as their pricinpal residence with 12 months of purchasing the property.


A qualifying home is one that is currently eligible for the Home Buyers’ Plan that the individual or individual’s spouse or common-law partner intends to occupy as the principal place of residence not later than one year after its acquisition. 


The credit shall be claimed in the year that the home is acquired. The credit may be claimed by the person who purchases the home or by that individual’s spouse or common-law partner.  Any unused portion of a persons FTHB’ Tax Credit may be claimed by the individual’s spouse or common-law partner.  Where multiple parties have purchased a home, the tax credit shall not exceed the amount that would apply for a indiviudals tax credit. The Tax Credit is effective for homes purchased after January 27, 2009 and will apply for 2009 and beyond. 


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