How government programs help “first-time” buyers onto the property ladder
Helen Morris, National Post
Published: Thursday, January 14, 2010
Purchasing a home for the first time can be pretty daunting, as well as financially challenging. There are a number of schemes at the municipal, provincial and national levels that may help ease some of that financial stress.
A first-time buyer may be eligible for a partial refund of the land transfer tax from the City of Toronto, to a maximum of $3,725, and from the Province of Ontario to a maximum of $2,000. The proposed Home Buyers' Tax Credit could net you $750 if it gains budgetary approval (it applies to certain buyers that close on a qualifying home after Jan. 27, 2009). The existing Home Buyers' Plan permits the withdrawal of up to $25,000 from an RRSP, but it comes with a 15-year payback period.
The first step, however, is to work out whether you are actually a first-time buyer - you may already have bought a home in the past, but with life's many changes, your status may also have changed in that regard. Here are some scenarios.
Buyer number one is someone who has never owned a home and is getting married next year. Her future husband owns a home, but he is going to sell it, and the couple will buy property together.
"[She] will qualify for the whole of the provincial Land Transfer Tax refund, provided ... she and her husband-to-be do not get married while he still owns the other property," says Cheryl Cruickshanks, barrister and solicitor with the law firm, Heydary Samuel Professional Corp.
(All scenarios outlined here have additional conditions, and all qualification details should be checked with a lawyer.)
"It will all depend on the timing of the marriage and the sale of the house," says Aurele Courcelles, director of tax and estate planning at Investors Group.
Ms. Cruickshanks adds that if the couple otherwise qualifies for the rebate but purchases the property before they are married, and they are not considered common-law spouses, only the woman will receive the land transfer tax refunds.
As well, if they are not common law and are not married before the purchase, this woman will qualify for the Home Buyers' Tax Credit. She will not qualify if the two are considered spouses before they buy the new property. She is disqualified on the basis of his previous homeownership, assuming he has been living in his property during the year of purchase or any of the four years immediately preceding the year of purchase.
But she can participate in the Home Buyers' Plan (wherein she withdraws up to $25,000 from her own RRSPs for the purchase, without incurring withholding tax) provided she is not considered the common-law partner of her fiancé or, if she is, provided she is not occupying his property as her principal place of residence up to 31 days before the withdrawal date, or within the four years preceding the year of withdrawal.
Buyer number two is going to divorce. The matrimonial home has always been in her soon-to-be ex-husband's name.
"This woman still will not qualify for the Land Transfer Tax refunds, even if [she makes a new] purchase after she is divorced..." says Ms. Cruickshanks, as any previous home ownership in any guise disqualifies her.
This buyer does qualify for the Home Buyers' Tax Credit if she buys her new home after the divorce goes through.
"It depends on the timing of the divorce," says Mr. Courcelles. "If she waits until after the divorce, then at the time of the [RRSP] withdrawal ... the first test is ‘Do you have a spouse?,' and the answer is ‘No'." So she is again considered a first-time buyer.
The third buyer is a new Canadian who has owned property overseas but never in Canada. He is ineligible for the land transfer tax refunds.
"You cannot have owned a house anywhere in the world previously" to qualify for the LTT, says Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals.
However, if that overseas home was not owner occupied, the buyer may be eligible for the Home Buyers' Tax Credit and the Home Buyers' Plan.
"This individual will qualify, provided he/she purchases a residential property within Canada, and provided he/she did not own and occupy the overseas property up to 31 days before the intended withdrawal date, or within the four years preceding the withdrawal," says Ms. Cruikshanks.
For further details on the various government home buying incentives:
Land Transfer Tax Refunds
rev.gov.on.ca/en/refund/newhome/index.html
toronto.ca/taxes/mltt.htm
Home Buyers' Tax Credit
cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html
Home Buyers' Plan
cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-09e.pdf
Registered Retirement Savings Plans
cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/menu-eng.html
Helen Morris, National Post
Published: Thursday, January 14, 2010
Purchasing a home for the first time can be pretty daunting, as well as financially challenging. There are a number of schemes at the municipal, provincial and national levels that may help ease some of that financial stress.
A first-time buyer may be eligible for a partial refund of the land transfer tax from the City of Toronto, to a maximum of $3,725, and from the Province of Ontario to a maximum of $2,000. The proposed Home Buyers' Tax Credit could net you $750 if it gains budgetary approval (it applies to certain buyers that close on a qualifying home after Jan. 27, 2009). The existing Home Buyers' Plan permits the withdrawal of up to $25,000 from an RRSP, but it comes with a 15-year payback period.
The first step, however, is to work out whether you are actually a first-time buyer - you may already have bought a home in the past, but with life's many changes, your status may also have changed in that regard. Here are some scenarios.
Buyer number one is someone who has never owned a home and is getting married next year. Her future husband owns a home, but he is going to sell it, and the couple will buy property together.
"[She] will qualify for the whole of the provincial Land Transfer Tax refund, provided ... she and her husband-to-be do not get married while he still owns the other property," says Cheryl Cruickshanks, barrister and solicitor with the law firm, Heydary Samuel Professional Corp.
(All scenarios outlined here have additional conditions, and all qualification details should be checked with a lawyer.)
"It will all depend on the timing of the marriage and the sale of the house," says Aurele Courcelles, director of tax and estate planning at Investors Group.
Ms. Cruickshanks adds that if the couple otherwise qualifies for the rebate but purchases the property before they are married, and they are not considered common-law spouses, only the woman will receive the land transfer tax refunds.
As well, if they are not common law and are not married before the purchase, this woman will qualify for the Home Buyers' Tax Credit. She will not qualify if the two are considered spouses before they buy the new property. She is disqualified on the basis of his previous homeownership, assuming he has been living in his property during the year of purchase or any of the four years immediately preceding the year of purchase.
But she can participate in the Home Buyers' Plan (wherein she withdraws up to $25,000 from her own RRSPs for the purchase, without incurring withholding tax) provided she is not considered the common-law partner of her fiancé or, if she is, provided she is not occupying his property as her principal place of residence up to 31 days before the withdrawal date, or within the four years preceding the year of withdrawal.
Buyer number two is going to divorce. The matrimonial home has always been in her soon-to-be ex-husband's name.
"This woman still will not qualify for the Land Transfer Tax refunds, even if [she makes a new] purchase after she is divorced..." says Ms. Cruickshanks, as any previous home ownership in any guise disqualifies her.
This buyer does qualify for the Home Buyers' Tax Credit if she buys her new home after the divorce goes through.
"It depends on the timing of the divorce," says Mr. Courcelles. "If she waits until after the divorce, then at the time of the [RRSP] withdrawal ... the first test is ‘Do you have a spouse?,' and the answer is ‘No'." So she is again considered a first-time buyer.
The third buyer is a new Canadian who has owned property overseas but never in Canada. He is ineligible for the land transfer tax refunds.
"You cannot have owned a house anywhere in the world previously" to qualify for the LTT, says Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals.
However, if that overseas home was not owner occupied, the buyer may be eligible for the Home Buyers' Tax Credit and the Home Buyers' Plan.
"This individual will qualify, provided he/she purchases a residential property within Canada, and provided he/she did not own and occupy the overseas property up to 31 days before the intended withdrawal date, or within the four years preceding the withdrawal," says Ms. Cruikshanks.
For further details on the various government home buying incentives:
Land Transfer Tax Refunds
rev.gov.on.ca/en/refund/newhome/index.html
toronto.ca/taxes/mltt.htm
Home Buyers' Tax Credit
cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html
Home Buyers' Plan
cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-09e.pdf
Registered Retirement Savings Plans
cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/menu-eng.html
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