Dernière mise à jour le November 13th, 2020
Subsidies and tax credits for the purchase of a home or condo
Have you ever looked at a flyer a month after you bought a big item, like a computer, and found that there was a $200 discount on the same computer? It’s happened to me before and it’s quite frustrating. Now, imagine noticing a year too late that you were eligible for a subsidy that would have saved you thousands of dollars with the purchase of your home! Frustrating no!? I wrote this article specifically to avoid this frustration, I will describe all the possible subsidies and tax credits when purchasing a property.
There are many ways to save money when buying a property. Many of these programs or subsidies primarily favour first-time buyers, however there are several subsidies available to help people who have already purchased a home or condo. In fact, did you know that it is wrong to think that the Home Buyers’ Plan (HBP) only applies to the purchase of a first property? Under certain conditions, the Home Buyers’ Plan can be used several times. You’ll find out how later in the article.
If you are interested in the new measure offered by CMHC where CMHC also puts 5% down payment on the purchase of a first property, I have written an article just for this measure. Click here to find out more.
1. Home Buyers’ Plan (HBP)
When used properly, the HBP could save you thousands of dollars. The Home Buyers’ Plan allows you to use up to $35,000 that you would have invested in your RRSP as a down payment on a home or condo. If you don’t have an RRSP, this measure remains very interesting (it might even be more).
In fact, here is the example of Marc who would like to buy his first house, but who does not have any RRSP’s. Marc has a good salary of $40,000 a year. At this salary, he is taxed at about 25%. Since Marc has never contributed to his RRSP, he is entitled to contribute $33,000 this year. He has $35,000 that he wanted to invest in the purchase of his first home. However Marc made the right choice to go to a mortgage broker before taking out his loan :p. The broker explained to him that if he first put his $35,000 into an RRSP, he would have a very large tax refund at the end of the year. Here we are talking about 25% (his tax rate) on $35,000 (his investment in an RRSP), which is an additional $6,250 that he will receive during the tax period! By the way, the higher your salary, the higher your tax percentage, so the more interesting your tax refund will be!
It is important to note that your funds must be invested in an RRSP at least 90 days before they can be used for the HBP.
It is also important to note that you will then have 15 years to pay off your RRSP. However, this money will always be yours and you will be happy to have it once you retire. If you prefer not to have an RRSP, it is also possible not to pay it back. However, this will virtually increase your salary by 1/15 of the amount used for the HBP. In this example we are talking about $35,000/15 or $2,333.33 per year.
Finally, many people think the HBP is only available for the purchase of a first home. This belief is understandable, but false. The truth is that you can use HBP several times in your life.
However, you must meet the following conditions:
- Have not owned your main residence in the last 5 years. A cottage or income building where you are not a resident is not considered your main residence, so you remain eligible if you own these.
- Not having lived with a common-law spouse who owned his or her main residence in the last 5 years.
- Have finished paying off your old Home Buyers’ Plan.
Are you familiar with the Home Buyers’ Tax Credit? No!? You should, it could give you 750 dollars to purchase your first property. More details will be available at the end of the article, but for now, here is the partial GST and QST refund when building a new home.
2. Partial refund of GST and QST when building a new home
When you build a new home, you have to pay consumption taxes (GST and QST). Together, they represent about 15% of the purchase price, which is a fairly high amount when you are looking at a transaction worth a few hundred thousand dollars! The good news is that you can get some of your money back!
This refund also applies for major renovations.
In addition, you would be eligible for a subsidy if you built a Novoclimat-certified house.
Applying for this subsidy still requires a bit of work. In particular, you will need to send all these documents to Revenu Quebec:
- Application for a building permit from its municipality
- The land contract
- The builder contract
- All invoices related to the work
- The home insurance policy
- The most recent municipal assessment or property tax bill
- Any other relevant documents
3. Purchase/renovation program
It is not a subsidy per se. Rather, it is CMHC’s Purchase Plus Improvements program, which is interesting when you want to buy a home that needs renovations or one you would like to improve on. With this program, it is possible to borrow up to 10% more than the value of the home you are buying. For example, for a $300,000 home, you would be entitled to an additional $30,000 for renovations. Of course, you will have to meet the purchasing power requirements of the banks. Also, the additional $30,000 will be added to your loan and you will have to repay the loan and the interest on it.
If you are planning on doing energy-efficient renovations, you can apply for a tax credit at one of the following programs:
If you do so-called energy-efficient renovations, you would be eligible for a subsidy from the Novoclimat program.
Green Heat Subsidy
If you want to change an oil water heater to a more environmentally friendly water heater, you could qualify for the Chauffez Vert program.
4. Refund of the welcome tax
5. Tax credit on the purchase of a first home
The federal government offers this tax credit to first-time homebuyers. This tax credit is very interesting because it entitles you to approximately $750 more in tax refund.
The credit is calculated as follows. You must multiply $5,000 at the lowest tax rate of the year for which you make the claim. For example, in 2015, the lowest tax rate was 15%, so $5,000 x 15/100 = $750.
If you have to pay taxes, you will not receive the $750. However, you will have $750 less to pay in taxes!
To claim this tax credit, you must apply for it on Appendix 1 line 369 of your federal tax return. I can already hear you asking me, “That’s it? No need to send proof that I bought a house?” Well yes that’s it, you don’t need to send proof, but you must have it available in case the Canada Revenue Agency would like to take a look at it.
Updated April 04 2018
The provincial government also announced that it was offering a subsidy similar to this one. From what I understand, it is no longer $750, but up to $1,326 that you could receive.
In fact, once again this is not just for first-time homeowners. You will be subject to the same eligibility criteria as for the HBP. That is, if you or your common-law partner have not owned your primary residence in the last 5 years, you are eligible! Also, if you are disabled, or are buying a home that will be more suitable for a disabled person who will reside with you, you are eligible for this tax credit, even if you own your home at this time.
For more details, I invite you to visit this site.
I also invite you to check out this article that talks about new Incentives for First-time Buyers.
I invite you to put this article in your favorites and look at it when you are ready to buy your home. I am committed to updating it so that you will always get the best possible subsidies and tax credits.
After reading this article, do you think you missed out on one of these tax credits?
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