Taxes for first-time homebuyers

Why read this?

Your client:

• › buying their first home; or
• › building their first home.

What to do

Use the Home Buyers’ Plan (HBP)

Your client is eligible if she meets CRA’s definition of a first-time homebuyer. To qualify, your client can’t have lived in a home that she, or her spouse or common-law partner, owned in the last four years. In that case, she can withdraw up to $25,000 from her RRSP to buy or build a home.

• When buying or building:
  • Use Form T1036: Home Buyers’ Plan Request to Withdraw Funds from an RRSP to determine if your client is eligible for the HBP.
    • Have the RRSP issuer complete Area Two of the form
    • Keep the form for your client’s records.
  • At tax time:
    • Report Home Buyers’ Plan RRSP withdrawals.
    • Report the amount in Box 27 of your client’s T4RSP: Statement of RRSP Income onLine 18 ofSchedule 7: RRSP and PRPP Unused Contributions, Transfers and HBP and LLP Activities.
      • Check the box on Line 19 of Schedule 7 if your client’s address is the same as the home acquired under the HBP.
    • b. Report Home Buyers’ Plan RRSP repayments.
      • Your client has 15 years, starting the year after her home purchase, to repay the amount she withdrew from her RRSP under the HBP.
      • Designate RRSP contributions as HBP repayments on Line 6 of Schedule 7.
      • If your client doesn’t repay the minimum, report the difference on Line 129 of the return. CRA treats the unrepaid amounts as income, says accountant Colleen Gibb, partner at Gibb Widdis in Ancaster, Ont

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  Your client’s minimum annual repayment is listed on her Notice of Assessment or Reassessment, Form T1028: Your RRSP Information, or on My Account.

  

  Your client can’t use funds from the Saskatchewan Pension Plan or a Pooled Retirement Pension Plan for the HBP.

  2 Claim the Home Buyers’ Amount

  • If your client meets the criteria for the HBP, she qualifies for the Home Buyers’ Amount.
  • Enter $5,000 on Line 369 of Schedule 1: Federal Tax

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  The claim may be split between your client and her spouse or common-law partner, but the total on both returns can’t exceed $5,000.

  Don’t claim political donations on Line 349 (Donations and Gifts) of the return. Political contributions have different tax rules compared to other donations.

  3 Claim the GST/HST New Housing Rebate

  • Your client is eligible for a rebate if:
    • she bought a new or substantially renovated house, built her own home or substantially renovated her existing home;
    • the fair market value of the home and property is less than $450,000;
    • your client or a relation is the first person to live in the house; and
    • your client paid GST/HST on the purchase of the land or building materials.

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    Have the house independently appraised to confirm its fair market value is less than $450,000, in case CRA disputes it, says Gibb.

  If a partnership or corporation partially owns the house, your client can’t claim the rebate.

  • Your client has two years from the time that construction or renovation is substantially completed to claim the rebate.
    • If your client built her own home, use Form GST191-WS: Construction Summary Worksheet to calculate the rebate.
      • Report the rebate on Form GST191: GST/HST New Housing Rebate Application for Owner-Built Houses.
      • Mail Form GST191 to CRA.
• If your client purchased a new home from a builder, use Form RC7190-WS: GST190 Calculation Worksheet to calculate the rebate, but also fill in Form RC7190 for Ontario, B.C. and Nova Scotia (e.g. RC7190-ON for Ontario).
  • Report the rebate on Form GST190: GST/HST New Housing Rebate Application for Houses Purchased from a Builder.
  • Mail Form GST190 to CRA.

• Keep copies of the forms and original invoices for your client’s records. It may take up to six months for CRA to send your client the rebate.

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B.C., Nova Scotia and Ontario offer provincial rebates.

If the builder pays or credits the GST/HST rebate to your client, then the builder is entitled to the rebate, says Gibb.

Sources: Colleen Gibb, FCPA, FCA, Partner, Gibb Widdis, Ancaster, Ont.; CRA