Building a new home can be exciting but also expensive. Luckily, the Canada Revenue Agency has a number of programs including a new home builder’s tax rebate to help offset your expenses.
GST/HST New Housing Rebate
If you purchased a newly built home to use as your primary residence, you can claim a rebate for goods and services tax/harmonized sales tax paid on the purchase. To qualify, the home must be worth less than $450,000, and you must own the land or have at least a 20-year lease with an option to buy. If you do not own the land, its estimated value is added to your home’s value when determining your eligibility for the rebate.
When you buy your home, the builder may pass this rebate to you directly by lowering the price of the home to reflect the rebate. If the builder who sold you the home does not offer you the rebate, you have two years from the date you purchased the home to apply for the rebate from the CRA.
In both cases, you must complete FORM GST190 GST/HST New Housing Rebate Application for Houses Purchased from a Builder. If you build your own home or hire a builder and oversee the process, claim this rebate using form GST191.
First-Time Home Buyer’s Tax Credit
If the home you purchased is your first home, you may also be eligible to claim a first-time home buyer’s tax credit, but this non-refundable credit can only be used to cover taxes owed. To maximize its usefulness, consider splitting it between your tax return and your spouse or common-law partner’s tax return so the credit helps the spouse with the highest tax liability.
To be considered as a first-time home buyer, neither you nor your spouse or common-law partner should have owned and lived in your own home within the last four years. For example, if you or your partner bought, lived in and then sold a home three years ago, you cannot claim the HBTC. However, if you bought, lived in and then sold a home five years ago, you can be considered a first-time buyer.
The four-year rule only applies to homes in which you live.
If you are buying a new home to accommodate a disability and you qualify for the disability tax credit, you can claim the HBTC without meeting the definition of a first-time buyer.
Home Buyer’s Plan
Through the home buyer’s plan, first-time home buyers have the opportunity to borrow funds from their Registered Retirement Savings Plans to help pay for a new home. Through the HBP, you may withdraw up to $25,000 from your RRSP without declaring the withdrawal as income on your tax return. However, you must pay back the funds within 15 years.