Government Incentives for First Time Home Buyers

 

RRSP Home Buyer's Plan

The RRSP Home Buyer's Plan (HPB) was introduced by the Federal Government and allows first time home buyers to withdraw up to $25,000 from their RRSP's tax free to use towards the purchase of a home.  To qualify as a first time home buyer, purchaser must not have lived in a home owned by himself or his spouse in the last five years.  If both you and your spouse qualify under the Plan, you can each withdraw up to $25,000 from your RRSPs for a total of $50,000.

 

Before you are entitled to withdraw the money from your RRSP, you must have entered into a written agreement to purchase or build a home that you intend to occupy as your principal residence.  The purchase of a cottage, for example, would not qualify for this program as it is not a principal residence.

 

Money can be withdrawn from your RRSP provided it has been in your RRSP for at least 90 days.  If you have signed an Agreement of Purchase and Sale  and you have at least 90 days until your closing date, you can open an RRSP and make a contribution, receive the tax deferred benefit and then withdraw the same money and put it towards the purchase of your home.

 

Money withdrawn under this Federal program must be paid back to your RRSP within 15 years.  People generally deposit one fifteenth of the amount withdrawn back to the RRSP over each of the following 15 years.  If you do not pay the full amount back to your RRSP within 15 years, the amount outstanding will be subject to tax when you file your income tax return in the following year.

 

Provincial Land Transfer Tax Refund

In the 2007 Ontario Economic Outlook and Fiscal Review, the government proposed to expand the Land Transfer Tax Refund Program to include first time homebuyers of resale homes after December 13, 2007.  This measure was included in Bill 44, Budget Measures and Interim Appropriation Act, 2008, and, having received Royal Assent on May 14, 2008, is now law.  As a result of this change, first time homebuyers of resale homes, may now be able to receive a refund from the provincial government of up to $2,000 of the land transfer tax paid.

 

To qualify for the refund:

•¨   You must be at least 18 years old;

•¨   You cannot have previously owned a home, or an interest in a home anywhere in the world;

•¨   Your spouse cannot have owned a home, or an interest in a home anywhere in the world, while he/she was your spouse.

 

The maximum refund is $2,000 and qualifying purchasers must apply for the refund no later than 18 months after registration of the home if they do not receive the refund at the time of registration.