To make it easier for your family to buy your first home there are 3 benefits that are available to you if you qualify as a Canadian resident. You can actually use all 3 at the same time if you wish.
1) Land Transfer Rebate
When you buy a residence you pay land transfer tax which is calculated according to the buying amount. No matter if the residence is a condo, townhouse, semi-detached or detached home. As First Time Home Buyers you have the benefit of a land transfer rebate or discount if you will. This rebate equals a maximum of $8,475 when buying inside Toronto. When buying outside Toronto it is equivalent to a maximum of $4,000. Why the difference? You pay a double land transfer tax inside the city of Toronto. While outside you do not.
2) First Home Savings Account
This is the newest benefit introduced in Canada. It allows you to open a registered savings account for the purchase of your first home. The contribution is tax-free. You can deposit up to $8,000 per person every year. The maximum is $40,000 overall. You can also use the money tax-free for the purchase of your first home. Do note the money in this account is invested so there is a risk involved with the investment. The benefit is that if the amount grows from your investment the profits may remain tax-free.
3) Home Buyers Plan
This plan allows you to withdraw money from your registered retirement savings plan (RRSP) for the purchase of your first home. The withdrawal limit is $35,000 per person. Do note that the amount you will withdraw must be returned to the RRSP within 15 years or when you sell your first home. The amount used will be added to your taxable income.
There are more benefits available for the purchase of your first home but they depend on meeting certain criteria. We will examine them in a future article.
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