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Léa Plourde-Archer
Léa
Plourde-Archer

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Buying a first home: what tax credits are available in Quebec?

Last modified: 2019/12/26 | Approximate reading time 3 mins

Since 2009, the tax credit for first time home buyers (FTHB) has been available through the federal government. This tax relief is part of a set of measures aimed at stimulating homeownership and construction throughout the country. The good news for Quebec residents is that the provincial government has introduced a similar tax credit for properties acquired after December 31, 2017. This measure was launched for the 2018 taxation year and is one of the reforms that were announced in the 2018-2019 Quebec budget.

What is the tax credit for the purchase of a first home? And what is the eligible amount at the federal and provincial levels? This is what we will be covering in the following paragraphs.

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The First-Time Home Buyers’ tax credit (FTHB)

This is a non-refundable credit offered at both the federal and provincial levels, which aims to encourage citizens to acquire their first property by helping them bear the costs associated with this purchase. Between inspection fees, appraisal fees, notary fees, moving fees and other related amounts, there are many different expenses related to buying a home. Therefore, this tax credit is a great opportunity to obtain tax relief following the purchase of a property.

According to an article by the University of Sherbrooke and the CFFP which was published in May 2019, the credit for the purchase of a first home resulted in an estimated tax expenditure of $120 million at the federal level for the 2018 taxation year. In Quebec, this new credit should represent an estimated tax expenditure of $28 million for that same year and benefit 47,000 households.

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How to calculate the tax credit for the purchase of a first home (federal)

To take advantage of this non-refundable tax credit, the purchasing party and their spouse (if applicable) must comply with certain conditions. The first being that neither of them has owned a home that same year or in the previous 4 years. The second condition is the obligation to use this property as a main residence, at the latest one year after the property has been purchased. Finally, it is important to mention that only primary residences can benefit from this tax credit. Therefore, the purchase of a second home does not qualify for this tax credit.

For the 2018 taxation year, the value of the tax credit for the purchase of a first home is $750 for Canadian citizens except for Quebec individuals, for whom the value of the credit is $626, taking into account the abatement for residents of Quebec.

To calculate this amount, simply multiply the amount of the credit ($5,000) by the lower personal income tax rate for the year 2018 (15%). This results in a maximum tax credit of $750, which will be reduced to $626 due to the federal abatement of 16.5% for residents of Quebec.

If several people have jointly acquired property, they will share the tax credit which cannot exceed $750. The tax credit for the purchase of a first home must be used before the end of the taxation year, as it cannot be carried over to the following year.

FTHB Tax credit for disabled people

Regarding the tax credit for disabled people, an exception to the rule does apply: if you buy a house for the benefit of a disabled person (because you are a relative or a close one), you do not have to respect the condition regarding “the purchase of a first property”, since you are buying this property for a third person.

However, this residence must be accessible and adapted to the needs of the person who will live there. Likewise, this house must become the main residence of the disabled person, at the latest one year after the purchase.

Calculating the tax credit for the purchase of a first home at the provincial level (Quebec)

The tax credit for the purchase of a first home in Quebec has the same eligibility criteria as the federal tax credit. It is also calculated in the same way, by multiplying the amount of the credit ($5,000) by the lower tax rate for the year (15%). This results in a maximum tax savings of $750.

To sum things up: Quebecers get a total tax break of up to $1,376 thanks to the two combined tax credits ($626 for the federal government and $750 for the provincial government). To claim the provincial tax credit for the purchase of a first home, simply complete form TP-752.HA "Homebuyers’ tax credit". The deadline is that of filing the income tax return.

Author: Karine Dutemple

Translation by: Lea Plourde-Archer

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