Canada’s First-Time Home Buyers’ Tax Credit and Line 31270 on Your Tax Return

What is the First-Time Home Buyers’ Tax Credit?

Many Canadians are struggling to buy their first homes. The goal of the First-Time Home Buyers’ Tax Credit (HBTC) is to make it a little easier for taxpayers to make their home ownership dreams come true by allowing eligible first-time home purchasers to claim a $10,000 non-refundable income tax credit. First introduced in 2009, the HBTC initially allowed first-time or disabled home buyers to claim an amount up to $5,000 on their returns. But in 2022, that amount doubled to $10,000. 

Since the HBTC is calculated by applying Canada’s lowest personal income tax rate of 15% to $10,000, that works out to a non-refundable tax credit of up to $1,500. If you owe, this can help bring down your tax payable to zero.

Which homes qualify for the First-Time Home Buyers’ Program?

A qualifying home is one that is located in Canada and registered in your name or your spouse or common-law partner’s name. This includes existing homes and homes under construction. According to the CRA, the following are considered to be qualifying homes:

• Single-family houses
• Semi-detached houses
• Townhouses
• Mobile homes
• Condominium units
• Apartments in duplexes, triplexes, fourplexes, or apartment buildings
• A share in a housing cooperative, if it gives you ownership of the underlying property

Who’s eligible for the First-Time Home Buyers’ Tax Credit?

There are two ways to qualify for the HBTC: as a first-time homeowner or as a person with a disability. 

In order to qualify as a first-time home buyer, you’ll have to meet the Canada Revenue Agency’s (CRA) criteria for a first-time home buyer:

• You or your partner must have bought a home that qualifies for the HBTC.
• You haven’t lived in a home that was owned by yourself or your partner for the last four years.

In order to qualify as a disabled person, you’ll have to meet the following CRA criteria: 

• You’re eligible for the Disability Tax Credit (DTC) the year you acquire your home. That means that you or one of your dependents has a serious and prolonged physical or mental impairment that has been certified by a medical professional. In order to qualify, you generally must experience difficulties in performing activities of daily living like walking, eating, hearing, or speaking. 
• You buy a home for the benefit of a person who is eligible for the Disability Tax Credit. In this case, the disabled person must be a relative, as defined by the CRA —that is they must be connected by blood, marriage, common-law partnership, or adoption. 
• The home is purchased to enable the disabled person to live in a home that is safe and comfortable. 
• The disabled person must occupy the home as their principal place of residence no later than one year after the property is acquired. 

Can two people claim the HBTC?

The HBTC can be split between spouses or common-law partners or claimed by just one member of the couple. However, the combined total claimed cannot exceed $10,000. Are you wondering how a couple should claim the home buyers’ amount? Here’s some guidance: Given that it’s a non-refundable credit, make sure the spouse claiming it pays at least $1,500 in federal income tax. If they don’t, the credit won’t fully be paid out. If neither spouse pays $1,500 in federal income taxes, then they should split the credit in a way that maximizes how much they’ll get back.

How do I claim the Home Buyers’ Tax Credit?

To claim the HBTC, enter the amount of $10,000 on line 31270 of your tax return. You can also divide the credit between your return and your spouse’s or common-law partner’s return, but the combined total claimed cannot be greater than $10,000.

The non-refundable tax credit rate is 15%. As 15% of $10,000 is $1,500, the actual reduction of your taxes will be $1,500. If your federal taxes are less than $1,500, your credit will be reduced accordingly, since it is a non-refundable credit.

If you are claiming the HBTC for a home purchased for a disabled relative, enter the amount on the same line (31270) on your tax return. The CRA may contact you to ask you how you are related to the disabled person.

Are there other first-time home buyer programs for Canadians?

Every little bit helps when you’re trying to purchase a new home. Make sure you look into these other programs to see if they could benefit you in addition to the HBTC. 

• Home Buyers’ Program (HBP): This program, which is also known as the first-time Home Buyers’ Plan, lets you withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) to buy or build a home. After withdrawal, you’ll have 15 years to repay the amounts you withdrew. 
• Tax-Free First Home Savings Account (FHSA): This program allows you to save $8,000 per year, or up to $40,000 total, in a tax-free account. You won’t pay taxes on the money you contribute to the account, nor will you pay taxes when you withdraw that money (if the withdrawal meets the qualifying conditions). 
• Home Accessibility Tax Credit (HATC): If you are disabled and receive the Disability Tax Credit (DTC) or are over 65 years old, this program allows you to claim up to $20,000 in expenses annually for home improvements designed to increase your home’s accessibility. The tax credit you can receive is 15% of that amount, for a maximum of $3,000.

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