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Buying a home in British Columbia can be a daunting task, especially for first-time buyers. However, various government programs are available to make this journey easier and more affordable. In this blog post, we'll explore some key programs that can benefit home buyers in BC, including first-time home buyers and others.
1. First Time Home Buyers' Program
This program offers significant relief from the property transfer tax for those purchasing their first home. Property tax is a big part of the cost to purchasing a home, so this is a great program to take advantage of if you are eligible.
Eligibility: Canadian citizens or permanent residents who have lived in BC for at least a year prior to the property registration and have never owned a principal residence.
Property Requirements: The home must be used as the principal residence, with a fair market value of $500,000 or less.
Benefits: Full or partial exemption from property transfer tax.
How to Apply: Through a legal professional during the property transfer tax return process.
More Information: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers
2. Newly Built Home Exemption
This exemption is for those who are buying a newly built home as their first property. This likely won’t apply to most folks, but may be useful in certain situations, especially as smaller lots become more common.
Eligibility: Applies to newly built homes. Canadian citizens or permanent residents who have lived in BC for at least a year prior to the property registration and have never owned a principal residence.
Property Requirements: The home must be used as the principal residence, with a fair market value of $800,000 or less.
Benefits: Full or partial exemption from the property transfer tax.
Application Process: Similar to the First Time Home Buyers' Program.
More Information: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/newly-built-home-exemption
3. First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a new initiative introduced by the Canadian government to assist first-time homebuyers in saving for their first home. It is a tax-efficient means for individuals to save for their first home, similar to how an RRSP helps one save for retirement.
Eligibility: Available to Canadian residents who are first-time homebuyers.
Contributions: Individuals can contribute up to $8,000 per year, with a lifetime contribution limit of $40,000.
Tax Benefits: Contributions to an FHSA are tax-deductible, similar to an RRSP. Additionally, the investment growth within the account and withdrawals made to purchase a first home are non-taxable, like a TFSA.
Withdrawal Conditions: Funds must be used to purchase a first home in Canada. If not used for this purpose, they can be transferred to an RRSP or RRIF or withdrawn with taxes applied.
Combination with Other Programs: The FHSA can be used in conjunction with other first-time homebuyer programs, such as the Home Buyers' Plan (HBP) and the First-Time Home Buyer Incentive.
More Information: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html
4. Federal Programs
First-Time Home Buyer Incentive
Benefits: Offers 5-10% of the home’s purchase price to help with the down payment.
How it Works: Individuals received a shared equity “loan” from the Government of Canada, which is repayable when the home is sold or after 25 years, whichever comes first.
More Information: https://www.cmhc-schl.gc.ca/consumers/home-buying/first-time-home-buyer-incentive
Home Buyers' Plan (HBP)
Benefits: Allows withdrawal of up to $35,000 from RRSPs tax-free to buy or build a qualifying home.
How it Works: The withdrawal is similar to a loan to yourself from your RRSP funds, which must be paid back within 15 years. The repayment period starts in the second year after you have made the withdrawal, and you must repay a minimum amount every year.
More Information: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html
These programs are designed to make home buying more accessible and affordable in British Columbia, especially for first-time buyers. It's important to review each program's specific criteria and conditions to understand how they can benefit you in your home-buying journey. Of course, because there is taxation involved in these programs, it’s important to consult with your accountant and/or legal counsel in order to ensure that you qualify before making any decisions based on this information.
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