Available Benefits for First-Time Homebuyers (in BC, Canada)

It can often be overwhelming for first-time homebuyers when purchasing a property, and they may not be aware of the benefits available to them. First-time homebuyers in British Columbia may be eligible for several benefits and programs aimed at assisting them with the purchase of their first home. According to the Government of Canada website, a first-time homebuyer is defined as:

“…if you did not, at any time in the current calendar year before the withdrawal (except the 30 days immediately before the withdrawal) or at any time in the preceding four calendar years, live in a qualifying home (or what would be a qualifying home if located in Canada) as your principal place of residence that either you owned or jointly-owned, or your current spouse or common-law partner (at the time of the withdrawal) owned or jointly-owned.”

Here are some benefits available to first-time homebuyers (along with some additional benefits that are not exclusive to first-time homebuyers):

Home Buyer's Plan (HBP):

The HBP allows first-time homebuyers to withdraw up to $35,000 (per borrower) from their Registered Retirement Savings Plan (RRSP) to use towards the down payment or other eligible costs of purchasing a home. The withdrawn amount is tax-free, and buyers have up to 15 years to repay the funds into their RRSP.

First Home Savings Account (FHSA):

The First Home Savings Account is a new registered plan designed specifically to assist first-time homebuyers in saving for their initial property without incurring any taxes. With this account, individuals have the opportunity to contribute up to $8,000 annually, with a lifetime maximum of $40,000. Unused contributions carry over to the following year. One of the significant advantages of the FHSA is the ability to invest funds within the account without being subject to taxation. Another benefit, is that any contributions made to this account are tax-deductible (similar to an RRSP). Moreover, there is a time limit associated with utilizing the savings from the account towards the purchase of your first home. You have a span of 15 years starting from your initial contribution, or until your 71st birthday, or even until the year following your first qualifying withdrawal from the FHSA, depending on whichever comes first. Withdrawals from this account are tax free similar to a TFSA and unlike an RRSP, they do not need to be paid back (the funds must be used towards the purchase of your first home). It’s worth knowing that you’re able to open multiple FHSA accounts but the total contribution room cannot be exceeded. Furthermore, it is worth noting that individuals can simultaneously make use of both the RRSP Home Buyers Plan and the FHSA to facilitate their journey towards homeownership.

Property Transfer Tax Exemption:

This program exempts eligible first-time homebuyers from paying the Property Transfer Tax (PTT) on properties valued up to a certain threshold. Currently, the PTT is fully waived for properties valued up to $500,000, and a partial exemption is available for properties valued between $500,000 and $525,000.

First-Time Home Buyers’ Tax Credit (HBTC)

The First-Time Home Buyers' Tax Credit (HBTC) provides a non-refundable income tax credit of $10,000 for first-time homebuyers, resulting in potential tax savings of up to $1,500. To qualify, either you or your spouse/common-law partner must purchase a qualifying home, which should be your primary residence within a year of acquisition. Additionally, you must be a first-time homeowner, and neither you nor your spouse/common-law partner should have owned another home, inside or outside Canada, in the year of acquisition or the preceding four years.

To claim the credit, enter $10,000 on line 31270 of your tax return if you are not splitting this amount with your spouse/common-law partner. If you choose to split the amount, it is acceptable as long as the total does not exceed $10,000.

The following benefits are not exclusive to first-time homebuyers.

First-time homebuyers can also take advantage of the following benefits available to everyone.

BC Home Owner Grant:

The BC Home Owner Grant is a valuable benefit available to most homeowners in British Columbia. This grant is specifically designed to assist homeowners in paying their BC property tax for their principal residence. Eligibility for this grant extends to homeowners whose assessed property value is $2,125,000 or less. Even if the assessed value exceeds this threshold, homeowners may still receive a partial grant. The grant amount varies depending on the location of the property. Properties situated in the Capital Regional District, the Metro Vancouver Regional District, and the Fraser Valley Regional District typically receive $570, while properties in all other areas of the province receive $770. It is important to note that homeowners can apply for this grant only once a year.

GST/HST New Housing Rebate:

Buyers purchasing a newly constructed or substantially renovated home may be eligible for a rebate of a portion of the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) paid on the purchase. The rebate amount depends on the home's purchase price and is capped at certain thresholds. Applies only for the individual’s primary residence.

Newly Built Home Exemption:

Under this program, buyers of newly constructed homes may be eligible for a property tax exemption or a reduced property tax rate for a specified period. The duration and availability of this exemption may vary among municipalities.

Property Tax Deferment Programs:

The provincial government offers property tax deferment programs for certain eligible homeowners. These programs allow homeowners to defer payment of their property taxes until a later date, usually when the property is sold or transferred.

Whether you’re a first-time home buyer or a seasoned veteran, you can potentially purchase a home in British Columbia, Canada, for as little as 5% down if the purchase is under $500,000. It’s important to note that for any of these programs they each have their own nuances and potential drawbacks and each should be reviewed carefully.